Johannesburg - South Africa's rand edged firmer on Tuesday after manufacturing output bounced back from a contraction, but the currency could fall back if numbers due later in the week undermine the view of a gradually improving domestic economy.
September factory production expanded by a better-than-anticipated 8 percent year-on-year, following a 1 percent contraction in August.
The jump, better than a 5.1 percent rise predicted by a Reuters poll, provided a timely boost for the rand.
The currency had slipped to 5-week lows against the greenback following a downgrade by Moody's on Thursday that pushed the country's credit rating to only two notches above speculative grade status.
By 16:58 SA time the unit traded 0.22 percent firmer at 11.2460 versus the dollar, moving to within striking distance of a technical support level below 11.1534.
The rand, however, faces downside pressure from a dollar buoyed by positive signs from the US economy and the risk of further downgrades to South Africa's coveted investment grade credit status.
“Manufacturing numbers were fairly robust but it's a dollar market and the rand will remain on the back foot,” said Cheslyn Francis, a portfolio manager at Afrifocus Securities.
The greenback raced to a 7-year high against the Japanese yen and was also stronger against the euro.
Yields on government bonds ticked higher at an auction earlier in the session, and by late trade the benchmark issue due in 2026 had added 1 basis point to 7.965 percent. - Reuters