The rand fell to the weakest level in almost four years as accelerating inflation added to concern about slowing growth amid labor protests and civil unrest in Africa’s biggest economy.
South Africa’s currency fell as much as 2.1 percent to 9.0428 a dollar, the weakest intraday level since April 22, 2009. It traded 1.9 percent down at 9.0205 as of 6:12 p.m. in Johannesburg, the worst among 25 emerging-market currencies monitored by Bloomberg. Yields on 6.75 percent bonds due March 2021 rose seven basis points, or 0.07 percentage point, to 6.45 percent.
Consumer inflation jumped to a seven-month high in December, reducing the central bank’s room to stimulate the economy. Protests by township residents opposed to a government plan to redraw municipal boundaries in Sasolburg in the Free State province left two people dead yesterday, police spokesman Motantsi Makhele said. The riot comes a week after Anglo American Plc (AAL)’s platinum unit announced plans to fire workers amid labor unrest in the mining and agricultural industries.
“All these factors are weighing on the rand,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. (NED) in Johannesburg, said by phone. The rand’s drop triggered automated orders to sell the currency, known as stop-losses, which hastened the decline, he said.
The rand may extend its fall to 9.20 per dollar if it breaches 9.04, a key support level for the currency, Nalla said.
The consumer price index accelerated to 5.7 percent in December, compared with 5.6 percent in November, Statistics South Africa said today. The Reserve Bank will keep benchmark rates unchanged tomorrow at 5 percent after its monetary meeting, according to all 21 economists in a Bloomberg survey.
Foreign investors sold a net 1.2 billion rand ($133 million) of South African stocks and bonds yesterday, according to JSE Ltd., operator of the stock and bond exchanges. South Africa’s trade deficit grew to 112.7 billion rand in the first 11 months of 2012, more than six times bigger than a year earlier, according to government data.
Faster inflation “will be a constraint on just how much the SARB can do in using monetary policy to stimulate the economy,” Russell Lamberti, a Johannesburg-based economist at ETM Analytics, and colleagues wrote in an e-mailed note to clients. “Imbalances in the form of the trade and record current-account deficits will further constrain the SARB’s ability to cut.”
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