Rand Declines Second Day as Strike Concern Damps Investor Demand

The rand declined for a second day as the prospect of a strike in South Africa’s agriculture industry damped investor demand for the currency. Bonds gained, driving benchmark yields to near-record lows.

The rand slipped 0.2 percent to 8.5842 a dollar as of 3:46 p.m. in Johannesburg. Yields on 10.5 percent bonds due December 2026 dropped seven basis points, or 0.07 percentage point, to 7.21 percent, less than one basis point off the record low reached on Dec. 20.

Agriculture workers are set to resume a strike tomorrow in the Western Cape province, demanding that the minimum wage be increased to 150 rand ($17) a day, from 70 rand. Two people died as farmworkers burnt down vineyards and sheds, causing damages estimated at 120 million rand during strikes that began on Nov. 6, according to AgriSA, the main farmers group.

“There is talk of some concern about further strike action in the Western Cape, which will keep investors wary of selling dollars too aggressively,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, and colleagues wrote in e-mailed comments. Dollar demand from South African importers may also weigh on the rand, they added.

Most South African businesses re-opened this week after the three-week summer holiday that started on Dec. 17. The rand rallied 5.1 percent in December, the best performer of 16 major currencies monitored by Bloomberg and traded as low as 8.6793 on Dec. 14.

Bond Rally

Bonds advanced amid speculation jobs growth in the U.S. isn’t fast enough to persuade the Federal Reserve to end its bond-buying program, which has fueled demand for higher-yielding assets including emerging-market bonds.

U.S. payrolls rose by 155,000 workers last month following a revised 161,000 advance in November, which was more than initially estimated. The median estimate of 82 economists surveyed by Bloomberg had called for an increase of 152,000. The U.S. unemployment rate remained at 7.8 percent.

“The Fed has pledged continued monetary stimulus as long as the unemployment rate remains above 6.5 percent, backing expectations for” interest rates to remain low throughout 2013, Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, and colleagues said in a note e-mailed to clients today.

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