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Rand Falls to 4-Week Low as Strikes Spread, Rate Cut Bets Rise

The rand retreated to a four-week low as strikes spread in South Africa’s mining industry and on rising expectations the central bank will cut interest rates.

The nation’s currency depreciated as much as 1.1 percent to 8.4583, the lowest since Sept. 5, and traded down 0.8 percent at 8.4275 per dollar by 4:22 p.m. in Johannesburg. Yields on benchmark 6.75 percent bonds due 2021 fell two basis points, or 0.02 percentage point, to 6.56 percent.

Strikes spread to Harmony Gold Mining Co.’s Kusasalethu Mine and Kumba Iron Ore Ltd.’s Sishen mine, the companies said today. Walkouts have also suspended sites owned by AngloGold Ashanti Ltd., South Africa’s largest gold miner, and Anglo American Platinum Ltd., with its Union operation the latest to be disrupted, it said late yesterday.

“The focus has shifted from international factors to much more attention on domestic factors like the strikes,” David Gracey, who heads currency and derivatives trading at Investec Bank Ltd., said by phone.

Bonds rallied yesterday and forward rate agreements dropped the most since Aug. 23 after South African Reserve Bank Governor Gill Marcus rekindled speculation she’ll cut borrowing costs, saying last month’s decision to keep rates steady “was not an easy one.” Current buying levels of South African bonds were unsustainable, with the rise in inflows attributable to the inclusion of the country’s debt in Citigroup Inc.’s World Government Bond Index, Marcus said.

“She has certainly raised expectations of a rate cut, which is fundamentally not good for the rand when we have all these massive imbalances,” Gracey said.

South Africa’s trade shortfall reached 12.2 billion rand ($1.5 billion) in August, compared with 6.7 billion rand in July, the Pretoria-based South African Revenue Service said on Sept. 28 as exports of mineral products such as coal and iron ore slumped.

China’s non-manufacturing purchasing managers’ index fell to 53.7 in September from 56.3 in August, the weakest growth since at least March 2011. Euro-area services and manufacturing output contracted for an eighth month in September, adding to signs the economy has slipped back into a recession that may extend through the end of the year.

The euro area bought 22 percent of South Africa’s exports last year, while China accounted for about 13 percent, according to government data.

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