CAPE TOWN – The rand got much-needed impetus from the 3.1 percent growth in the country’s second-quarter gross domestic product (GDP), which was higher than expected.
However, analysts say offshore developments would determine the direction for the rand as sentiment is currently driving markets.
Senior research analyst at FXTM Lukman Otunuga said there was a collective sigh of relief across South Africa after economic growth surprised by expanding in the second quarter after the contraction witnessed during the first quarter.
“While this report is encouraging and does offer some light at the end of the tunnel for the nation, it does not change the fact that overall sentiment and economic conditions remain fragile,” said Otunuga.
With regard to the domestic currency, Otunuga said rand bulls should be injected with a renewed sense of confidence to send the dollar towards R15.10 in the short to medium term.
Otunuga said the GDP figure was unlikely to derail the SA Reserve Bank from cutting interest rates in an effort to stimulate domestic consumption and growth.
Treasury partner at Peregrine Treasury Solutions Bianca Botes said the improved GDP growth would not only work to overcome negative sentiment towards the country, but it would also assist in bolstering the anticipated combined growth expectation for the year.
At 1:40pm on Tuesday the rand was trading at R15.40 to the dollar from a R15.26 open.