The rand weakened to a four-year low against the dollar, extending its longest losing streak in a year on concern that renewed labor unrest and falling commodity prices will weigh on South Africa’s economy.
The situation at the nation’s mines, which contribute more than half of South Africa’s export earnings, is “quite volatile,” Cyril Ramaphosa, deputy president of the ruling African National Congress, said today. Violent protests cost mines 15 billion rand ($1.6 billion) in lost revenue last year and contributed to the rand’s 5.6 percent slide in the past six months. The dollar strengthened against all 16 major peers this week on speculation the U.S. Federal Reserve may end monetary easing that has weakened the currency.
“There is no doubt that the stories and rumors of strikes and union violence are the key factor of intraday volatility,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “Threats that the Fed could bring an early end to its quantitative-easing program” are driving the rand’s declining trend, he said.
South Africa’s currency depreciated as much as 1.2 percent to 9.4327 per dollar, the weakest level since April 2009. It traded 1.1 percent down at 9.4202 as of 9:25 a.m. in Johannesburg for a seventh straight day of declines, the longest streak since the nine days ending May 18, 2012. The currency has depreciated 3.2 percent this week. Yields on benchmark 10.5 percent bonds due December 2026 rose two basis points or 0.02 percentage point, to 6.85 percent.
The Association of Mineworkers and Construction Union, known as AMCU, is planning a march to government offices in Pretoria to protest against intimidation at mines. It hasn’t set a date for the march, Treasurer Jimmy Gama said. The National Union of Mineworkers has vowed to oppose plans by Anglo American Platinum Ltd. (AMS) to shut shafts and cut 6,000 jobs as metal-prices fall and costs rise.
Labor unions “fighting for turf” are adding to instability at mines, Ramaphosa said in an interview on Johannesburg-based Talk Radio 702. He called on unions and mining companies to hold talks to resolve disputes.
The dollar rose toward a six-week high against the euro before the Fed releases on May 22 minutes of its last meeting, when policy makers said they may alter the pace of monthly bond purchases. Fed Bank of San Francisco President John Williams said yesterday the central bank may begin to taper off buying as early as this summer.
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