Rand Fluctuates as Investors Sell Securities on Mining Concern

Jan. 21 (Bloomberg) -- The rand swung between gains and losses as foreign investors sold the most government bonds since October on concern cuts in mining production will weigh on South Africa’s current account deficit and economic growth.

The nation’s currency advanced less than 0.1 percent to 8.8853 per dollar as of 4:14 p.m. in Johannesburg after weakening as much as 0.3 percent in earlier trading. The rand dropped 1.8 percent last week, the worst performer of 25 emerging-market currencies monitored by Bloomberg. Yields on 10.5 percent bonds due December 2026 were little changed at 7.24 percent after jumping seven basis points last week.

Plans by Anglo American Plc’s platinum unit to fire workers amid labor unrest in the mining and agricultural industries are weighing on sentiment. Foreign investors sold a net 3.3 billion rand ($372 million) of bonds Jan. 18, the most since Oct. 8, according to JSE Ltd., operator of the stock and bond exchanges. Foreigners sold a net 3.8 billion rand of equities last week, according to Bloomberg calculations.

The sale of South African assets “could simply be part of the normal to and fro but obviously raises the question of whether investors have started to lose faith in our economy again,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments.

Metals and other commodities accounted for 61 percent of South Africa’s exports in the first 11 months of 2012, according to government data.

The country’s purchasing managers’ index unexpectedly fell in December, declining to 47.4 from 49.5 in November, Kagiso Tiso Holdings said on Jan. 16. The median estimate of economists surveyed by Bloomberg was for the index to rise to 50.2.

Risk Sentiment

“Economic growth is becoming increasingly unsustainable and reliant on foreign capital inflows, making the economy vulnerable to changes in investor sentiment and risk perceptions,” Busisiwe Radebe, an analyst at Nedbank Group Ltd. in Johannesburg, wrote in a report e-mailed to clients today. “If sentiment deteriorates significantly, foreigners may withdraw funding, placing substantial pressure on the rand.”

The rand’s three-month implied volatility against the dollar climbed 15 basis points in the past week to 12.90 percent, indicating options traders see wide swings in the currency in coming weeks.

To contact the reporter on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

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