South African Rand minimizes losses as risk appetite boosts commodities

The South African Rand is strengthening against the US dollar during the European session this Tuesday, clawing back some losses from yesterday’s sharp decline.

The commodity-linked currency has been hammered recently due to labour unrest in the country’s mining sector as striking miners paralyzed most of the industry. Metals and other commodities  are a major source of income for South Africa and account for 45 percent of its exports.

As a result, South Africa’s credit rating was cut by  Standard & Poor’s on Friday. It was downgraded by one notch. S&P stated that strikes and social tensions could reduce fiscal flexibility and hurt growth in the African continent’s biggest economy.

However, an increase in risk appetite since Monday’s better-than-expected US retail sales data helped boost the rand.  Americans decided to spend more in September, helping lift sales figures by 1.1 percent, compared with economists’ forecast for a  0.8 percent increase .

Further adding to positive market sentiment was a report from China that showed export from the world’s second largest economy increased by more than expected.

All this positive news helped spur gains in stocks and commodity prices, and in turn buoyed the commodity-linked South Africxan currency.

Late on Monday the rand fell to its lowest in a week as USDZAR hit a high of  8.8327. This morning, as rand gained for the first time in three days, this pushed USDZAR lower to 8.7478.

Overall the rand is expected to remain vulnerable due to the ongoing striking miners as well as broadly weaker commodity prices.

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