• The country’s purchasing managers’ index rose the most in 17 months, reports Nasreen Seria of Bloomberg. The seasonally adjusted index increased to 48 last month from 39.3 in August. This is huge for South Africa, because manufacturing production accounts for 14% of its economy.
• The sub-index, which measures business activity, jumped to 49.4 last month from a 38.3 in August.
• New sales orders rose to 50.7 from 39.5 and manufacturers are starting to increase their inventories.
• The pace of job cuts may have also eased with the unemployment sub-index rising to 42.7 from 37.5 in August.
• The nation’s currency has been gaining ground on the dollar, surging 39% since March. The WisdomTree Dreyfus South African Rand (NYSEArca: SZR) is up 33.8% year-to-date.

South African state-owned companies may increase bond sales to finance more than $78.5 billion for infrastructure expansion over the next five years as government revenues were hit hard in the recession, reports Garth Theunissen of Bloomberg.

To grab direct exposure to South Africa, take a look at the iShares MSCI South Africa Index Fund (NYSEArca: EZA), which is up 43.4% year-to-date. (For more ways to get exposure to Africa, go here).

For more stories on South Africa, visit our South Africa category.

Kevin Grewal contributed to this article.

The dollar has taken a hit over the past few months and many currency experts believe that it will continue to remain weak because American consumers aren’t feeling confident,  U.S. policymakers want to keep U.S. goods cheap to entice foreigners to buy more of our stuff and the ballooning of the U.S. budget deficit, states Gary Gordon at ETF Expert.

As a result of the aforementioned, 12 out of the 14 “pure play” currency ETFs are trading above their 200-day moving averages and most have year-to-date gains. (The two exceptions are the PowerShares DB U.S. Dollar Bullish (UUP) and the CurrencyShares Mexican Peso (FXM)).

To play currencies, mind the trend lines and have an exit strategy if you’re invested.

Some of the best performing currency ETFs include:

• CurrencyShares British Pound Sterling (FXB): up 12.5% year-to-date

• WisdomTree South African Rand (SZR): up 26.2% year-to-date

• WisdomTree Brazilian Real (BZF): up 20.1% year-to-date

For more information on currency ETFs, take a look at our special report on currencies and visit our currency etf category.

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

Kevin Grewal contributed to this article.

South Africa’s government policies won’t be drastically changed as Pravin Gordhan becomes the new Finance Minster and Trevor Manuel is now head of  a planning commission, reports Nasreen Seria for Bloomberg. The financial markets are relieved after hearing about the appointment of Gordhan, who previously tripled tax collection in a decade as head of the South African Revenue Services.

It may still be too early to consider raising South Africa’s credit rating since the economy is projected to contract for the first time in 17 years with high unemployment rates.

The South African rand depreciated against the dollar after news of a change in the Finance Ministry and on possible ongoing slowdowns in the economy, write Janice Kew and Garth Theunissen for Bloomberg. It is also thought that the rand will further depreciate based on fundamental reasons.

A report is due to come out in which the manufacturing sector, which is 16% of South Africa’s economy, may have continued to drop on diminished demand for vehicles and commodity goods.

• iShares MSCI South Africa Index (EZA): up 12.7% year-to-date
  

• WisdomTree Dreyfus South African Rand (SZR): up 15% year-to-date

Max Chen contributed to this article.

Growth was almost at a standstill at an annualized 0.2% for the third quarter, which is the slowest pace in more than a decade. A recovery is not in the near future as the global credit crisis has taken away the demand for platinum and gold, report Nasreen Seria and Mike Cohen for Bloomberg.

The good news is for the South African rand, which has rallied to its highest level in three weeks after the Federal Reserve announced the $800 billion plan.

The plan is intended to thaw credit markets and create liquidity, which in turn has fueled demand for higher-yielding currencies, reports Garth Theunissen for Bloomberg.

The South African rand has advanced to a two-week high and has gained against United States and European markets. In turn, the FTSE/JSE Africa All Share Index was up 6.9%, the biggest jump since October.

• WisdomTree Dreyfus South African Rand (SZR), down 17.6% since July 8 inception

• iShares MSCI South Africa (EZA), down 47.3% year-to-date

In the second quarter, the country’s unemployment rate fell to 23.1% and economic growth rebounded from a six-year low, reports Nasreen Seria for Bloomberg. Economic expansion hit an annualized 4.9%, up from 2.1% in the previous three months.

Employment within the mining sector rose the highest, by 3.9%, while transportation industry employment rose 3.6%. Unfortunately, Africa’s largest economy hasn’t increased jobs at a fast enough pace to slash unemployment, which has led to a rise in both poverty and crime. Skilled workers are in short supply, as well, making the government’s goal of slashing unemployment to 14% by 2014 a tough one to attain.

Inflation remains high: it hit 13% in July, up from 11.6% in June.

The rand is also up against the U.S. dollar for the second consecutive day. A weaker dollar helped lift demand for precious metals. South Africa produces 80% of the world’s platinum and 10% of the world’s gold, which tends to cause the rand to move in tandem with metals, report Mike Cohen and Garth Theunissen for Bloomberg.

• NETS FTSE/JSE Top 40 Index (JNB), down 18.1% since May 22 inception
• iShares MSCI South Africa (EZA), down 16.4% year-to-date
• WisdomTree Dreyfus South African Rand (SZR), down 1.1% since July 8 inception

However, it is important to understand and know what to expect from currency ETFs before investing in them, as Anthony Welch for Index Universe explains.

Welch first points out that currency ETFs are not substitutes for money markets. Currency ETFs can and often do fluctuate in value, despite most of them paying monthly interest.

Similarly, currency ETFs are not substitutes for bonds. This is because bonds have a fixed date where an investor expects a return of principal. Meanwhile, currencies can decline for long periods of time and possibly never get back to the highs they once achieved. As a result, currencies are not something investors can buy and hold in the long run with a true degree certainty.

Currencies are also not similar to stocks. The currency market is enormous, being that currencies trade 24 hours a day and represent all the money in the world in a sense. Unlike most stocks, many currency traders have reasons to trade without the intention to make money, but rather to hedge risk.

Although currency ETFs are not like money markets, bonds, or stocks, they are very simple. Currency ETFs are nothing more than a relationship between two currencies, one of them usually being the U.S. dollar. These relationships fluctuate based on an extenuating number of circumstances ranging from interest rates, political climate and economic and GDP activity.

Some of the many Currency ETFs include:

• CurrencyShares Australian Dollar Trust (FXA), up 3.3% year-to-date
• CurrencyShares Euro Trust (FXE), up 4.2% year-to-date
• WisdomTree Dreyfus South African Rand (SZR), down 1% since July 8 inception
• WisdomTree Dreyfus Japanese Yen (JYF), down 4.5% since May 22 inception
• PowerShares DB US Dollar Index Bearish (UDN), up 1.9% year-to-date
• PowerShares DB US Dollar Index Bullish (UUP), down 0.4% year-to-date

For full disclosure, some of Tom Lydon’s clients own shares of UUP.

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

The top performer was the WisdomTree South African Rand (SZR), which returned 7.6% in July, reports Jesse Emspak for Investors Business Daily.

Although the dollar rose up against the British pound and yen, it fell against the rand by 5.4%.

Also ahead of the dollar were the BRIC currencies, particularly the WisdomTree Dreyfus Brazilian Real (BZF). The fund was up 3.3% for the month.

The dollar has fallen against the Mexican peso by 8.2% since the start of the year. CurrencyShares Mexican Peso Trust (FXM), up 13% year-to-date, reflects this.

Among the funds that have one-year records, the numbers are impressive:

• CurrencyShares Euro Trust (FXE) is up 18% in the last year
• CurrencyShares Australian Dollar Trust (FXA) is up 17.1% in the last year, although it has taken a hit in the last month by falling 1.3%

Some of the top-performing funds belong to currencies in emerging markets. Why? High interest rates.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

The South African rand strengthened against the euro for the second week in a row, showing the country’s strength and endurance in the global market. At the moment, the rand is outperforming high-yielding currencies, and it strengthened against the euro as interest rates neared their highest for the past five years, explains Garth Theunissen for Bloomberg.

The rand also offered the fourth-best carry-trade return against the euro among the 16 most popularly traded counterparts, as watched by Bloomberg. The rand gained 1.3% to 11.8922 per euro in Johannesburg.

Meanwhile, South Africa’s FTSE/JSE Africa All Share Index fell for the first time in three days, for a 2.2% decline last week, reports Garth Theunissen and Vernon Wessels for Bloomberg. The country’s inflation rate is likely to have risen for the 10th straight month, and it might be at its highest point since the targeted measure was introduced in 1998, reports Mike Cohen for Bloomberg.

The central bank has raised rates six times in one year, but has signaled that it’s done.

Several of the country’s biggest mining companies are in line to deliver earnings this week, including Anglo Platinum today, AngloGold Ashanti on July 31 and Anglo American Plc on July 31.

ETFs that could be impacted by South Africa’s activity and the forthcoming earnings reports include:

• WisdomTree Dreyfus South African Rand (SZR): Launched July 8
• NETS FTSE/JSE Top 40 Index Fund (JNB): launched May 22; Anglo Platinum is 6.6%; Anglo American is 14.7%
• iShares MSCI South Africa (EZA): down 13.8% year-to-date; Anglo Platinum is 5.4%; AngloGold is 4.3%

Roger Nusbaum for Seeking Alpha has a few examples for investors who may wish to use a currency investment as a proxy for commodities.

His first example is the WisdomTree South Africa Currency (SZR) as a proxy for gold.

But if an investor holds SPDR Gold Shares (GLD), there can be somewhat of a negative correlation. South Africa has a few imbalances and is facing inflation, so the correlation of the two will get better. Instead, Nusbaum suggests CurrencyShares Australian Dollar (FXA). If your portfolio holds Australia already, however, then avoid over-allocation.

CurrencyShares New Zealand Dollar (BNZ) would be a better diversification tool, and many consider the kiwi to be a commodity currency, because of the amount of meat, dairy and wool that is produced in New Zealand. So, rather, BNZ could be an agriculture proxy, and it avoids the volatility of the agriculture funds.

Nusbaum is not suggesting you buy either ETF, he is showing investors how to recognize themes and using other methods to access various asset classes that may not be so obvious.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.