The rand declined for a fifth day to the weakest level in more than five weeks as violent protests by farm workers in South Africa’s Western Cape province damped the nation’s appeal for investors.
South Africa’s currency retreated as much as 0.4 percent to 8.9576 per dollar, the weakest level since Oct. 8. It traded 0.2 percent weaker at 8.9378 as of 9:50 a.m. in Johannesburg. Yields on benchmark 10.5 percent bonds due December 2026 climbed five basis points to 7.76 percent after rising 10 basis points in the previous three days.
Strike-related protests that began in a grape-growing region of the province on Nov. 6 have since spread to 16 rural towns. One farmworker was killed in the southwestern town of Wolseley on Nov. 13, while vineyards and houses have been set alight. Violent labor unrest in South Africa’s mining industry since Aug. resulted in about 46 people killed and some mines halting production.
“It doesn’t paint a pretty picture if you’re an offshore investor,” Ion de Vleeschauwer, the Johannesburg-based chief dealer at Bidvest Bank, South Africa’s biggest chain of money- changers, said by phone. “I don’t see any respite for the rand in the short term.”
Foreign investors sold a net $600 million rand of South African stocks and bonds yesterday, according to JSE Ltd. data. The nation’s benchmark stock index fell to the lowest closing level since Oct. 31.
The labor unrest comes as concern about Europe’s debt crisis and rising tension in the Middle East damps investor demand for riskier assets, ETM analysts including Johannesburg- based George Glynos wrote in e-mailed comments. Millions of workers across Europe downed tools yesterday in protest against austerity measures, while Israel air strikes in the Hamas-ruled Gaza strip killed the leader of the group’s militant wing, Ahmed al Jabari.
“Against this backdrop, countries need to pay extra attention to ensuring they offer a more attractive risk proposition,” Glynos wrote. “Given both the domestic and international backdrop, traders would prefer to trade off a long-dollar base.”
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