Even though a survey of the economy indicated that business activity was at a nearly two-year low, the South African rand increased by more than 1% against the dollar on Monday.
The rand was trading at 19.2900 against the dollar at 1600 GMT, up roughly 1.15% from Friday’s closing price.
The dollar’s last price against a basket of world currencies was 103.950, down about 0.19%.
Chinese PMI data that indicated increased manufacturing and service activity helped the rand, according to DailyFX analyst Warren Venketas.
Since China is South Africa’s largest trading partner, good news about its economy typically drives up the value of South African assets.
Additionally, some profit-taking may have contributed to the rand’s strength, as the pair has been at extreme levels and in overbought territory for a while, according to a note from Venketas.
The worst rolling blackouts on record and U.S. accusations that South Africa had supplied weapons to Russia late last year caused investor sentiment to deteriorate and the rand to fall sharply last month.
Last week, it fell to an all-time low of 19.9075 to the dollar.
The Rand Merchant Bank analysts wrote in a research note that “(South Africa’s) geo-diplomatic risk has peaked, and foreign investors are starting to dip their toes back into (South Africa), but a strong dollar reduces scope for rand gains.”
The S&P Global South Africa Purchasing Managers Index (PMI) (ZAPMIM=ECI) declined for a third consecutive month in May as businesses continued to be negatively impacted by rolling power outages and inflationary pressures.
For information on the nation’s first quarter gross domestic product (GDP), investors will turn to Statistics South Africa on Tuesday. If it were negative, South Africa would be in a technical recession, which is characterized by two consecutive quarters of declining GDP.