S. Africa’s Rand Gains 1st Day in Three on Bets Retreat Overdone

The rand gained for the first time in three days as investors gauged the South African currency’s retreat to a two-week low was overdone.

The rand depreciated 2.4 percent last week and 1.1 percent on May 10 after planned job cuts by the nation’s biggest platinum miner sparked concern of renewed labor unrest and amid speculation the central bank will cut interest rates next week to counter slowing growth. A technical signal suggested the decline had gone too far.

“The rand is still edgy but should be able to stabilize after Friday’s sharp losses,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “Risks for the week remain large.”

The rand appreciated 0.3 percent to 9.0967 per dollar as of 11:04 a.m. in Johannesburg after retreating as much as 0.4 percent earlier to 9.1552, the weakest level since April 26. Yields on benchmark 10.5 percent bonds due December 2026 rose three basis points, or 0.03 percentage point, to 6.71 percent.

The stochastic oscillator for the rand versus the dollar rose last week above the 70 threshold that signals the currency may have depreciated too quickly and is poised for a rally. The measure, which tracks the price of a currency relative to its highs and lows during a particular period, had been above 70 from May 8 to May 10. It dropped to 67 today.

Mining Strikes

The National Union of Mineworkers said on May 10 it was prepared to strike against plans by Anglo American Platinum Ltd. (AMS) to dismiss as many as 6,000 workers as it closes three shafts at its South African mines. Violent strikes last year cost South African miners as much as 15 billion rand ($1.7 billion) in revenue and contributed to the currency’s 5.1 percent slide in December.

Retail sales growth in Africa’s biggest economy slowed to 2.4 percent in the year through March from 3.8 percent the previous month, a report may show on May 15, according to the median estimate of 15 economists in a Bloomberg survey.

A slowdown may spur the central bank to lower borrowing costs as soon as next week, Charles Robertson, chief economist at Renaissance Capital Ltd. in London, said by phone on May 10.

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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