December 2, 2019 / 5:11 PM / 6 days ago

UPDATE 1-S.Africa's rand hits 5-week peak as U.S. manufacturing slip aids EM's

(Adds latest prices, analyst quotes)

JOHANNESBURG, Dec 2 (Reuters) - South Africa’s rand powered to a 5-week best as a contraction in the U.S. manufacturing sector boosted bids for risk and emerging markets’ currencies and fuelled bets the Federal Reserve would cut lending rates.

At 1645 GMT the rand was 0.74% firmer at 14.5620 per dollar compared to an opening level of 14.6430, climbing to its firmest level since Oct. 28 despite caution ahead of economic growth figures due in the next session.

The poor manufacturing figures in the U.S., showing the sector contracted for a fourth straight month, pushed the greenback to a two-week low, giving room for risk currencies to rise.

Statistics SA publishes third quarter gross domestic figures on Tuesday at 0930 GMT.

A Reuters poll of economists and analysts sees quarter-on-quarter expansion at 0.1% from 3.1% previously, while year-on-year growth is forecast at only 0.4%.

The forecast for a weakening trend was bolstered by an November purchasing managers’ index by Absa that showed business activity fell further into contraction territory.

The index, a gauge of manufacturing activity in Africa’s most industrialised economy, fell to 47.7 in November from 48.1 points in October, well below the 50-point mark that separates expansion from contraction.

Low growth and its impact on government revenue has seen the country’s credit rating slide in recent years while public debt and unemployment have soared.

However, the rand has largely weathered those concerns due mainly to the high yield on offer, which will be further helped by low rates in the United States.

On the bourse, stocks fell after investors were cautious ahead of the third quarter growth data expected to show Africa’s most developed economy barely expanded. The benchmark JSE Top-40 Index was down 0.99% to 48,609 points while the broader All-Share Index fell 0.98% to 54,807.66 points.

“We’ve seen pretty wide losses, coming from different areas. We saw on MTN and Vodacom after the competition commission indicated that Vodacom and other telecom companies need to reduce their data prices between 30-40%,” said Paul Chakaduka, trader at GT247.

Telecom firms MTN and Vodacom fell to the bottom of the blue-chip index after the Competition Commission ruled that they must lower data prices in the next two months or they could face prosecution. MTN declined 6.4% to 86.46 rand while Vodacom closed 5% lower at 115.07 rand.

Bonds firmed, with the yield on the benchmark paper due in 2026 down 1.5 basis points to 8.46%. (Reporting by Mfuneko Toyana and Naledi Mashishi; Editing by Giles Elgood)

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