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Rand plunges after data signals robust US growth

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JOHANNESBURG – The rand plunged to fresh multi-month lows late on Friday after revised United States figures showed the world’s largest economy grew at a more robust pace in the second quarter than was initially estimated.

At 4:07pm the rand was at R11,2349 against the dollar from its close of R11,1992 on Thursday. The local unit weakened as far as R11,25 to the greenback, a level last seen on February 4.

Against the euro, the rand was at R14,2667 from Thursday’s close of R14,2799 and was at R18,2717 against the pound from R18,2811 previously.

Data from the US commerce department showed the US economy grew by at a stronger annual rate of 4,6% between April and June from previous estimates of 4,2%.

While the third estimate to US economic growth was in line with expectations, it induced strong dollar buying relative to the rand, according to ETM Analytics market analyst Sean McCalgan, which was indicative of how poor sentiment towards emerging markets was.

“Markets are reacting to the view that the US Federal Reserve will likely raise interest rates as early as next year,” McCalgan said, echoing the sentiment of most analysts, following a string of US data painting an encouraging picture of the economy’s growth trajectory.

The euro also weakened following the US gross domestic product print, returning near two-year lows at $1,2698 to the dollar from an overnight close of $1,2756.

The dollar has logged gains for 11 straight weeks and has appreciated about 6,5% on a trade-weighted basis against its major peers.

– BDLive

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