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 5.5 percent slide in the past six months. The dollar strengthened against all 16 major peers this week on speculation that the U.S. Federal Reserve may end monetary easing that weakened the currency.
“The news from the mines didn’t help, commodity prices have been pretty poor, especially gold and platinum, and the dollar has been strong all week,” Warrick Butler, head of rand trading at Standard Bank Group Ltd., said by phone from Johannesburg. A close above 9.37 per dollar today would open the door for a decline to 9.50 next week, he said.
South Africa’s currency depreciated as much as 1.3 percent to 9.4413 per dollar, the weakest since April 2009. It traded 0.8 percent down at 9.3932 by 3:30 p.m. in Johannesburg for a seventh straight day of declines, the longest streak since the nine days ending May 18, 2012. The currency depreciated 2.9 percent this week.
Yields on benchmark 10.5 percent bonds due December 2026 dropped two basis points, or 0.02 percentage point, to 6.81 percent. The yield is up 13 basis points this week.
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. A date hasn’t been set, Treasurer Jimmy Gama said. The National Union of Mineworkers has vowed to oppose plans by Anglo American Platinum Ltd. to shut shafts and cut 6,000 jobs as metal-prices fall and costs rise.
Gold fell for a seventh day in the worst slump since March 2009, while platinum dropped for a third day. Metals and other commodities accounted for 53 percent of South Africa’s exports in 2012, according to government data.
The dollar rose toward a six-week high against the euro before the Fed’s May 22 release of minutes from 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 within months.
“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.
The rand’s three-month implied volatility against the dollar has climbed 52 basis points this week to 13.17 percent, the highest since March 22, indicating that options traders see wider swings in the currency in coming months.