Rand Tumbles to 7-Week Low Amid Labor Unrest, Growth ConcernsRobert Brand
The rand fell to its weakest level in almost seven weeks, extending its third straight weekly decline, amid concern labor protests in mining and agriculture will curb exports and slow growth in Africa’s largest economy.
South Africa’s currency tumbled as much as 1.3 percent to 8.8981 per dollar, its worst level since Dec. 3. It was trading at 8.8850 at 4:10 p.m. in Johannesburg, the worst performer of 16 major currencies monitored by Bloomberg. The rand fell 1.8 percent this week, the biggest five-day slide since October. Yields on 10.5 percent bonds due December 2026 jumped four basis points, or 0.04 percentage point, to 7.23 percent. The yield has climbed 12 basis points from a record low reached Jan. 10.
Anglo American Plc’s platinum unit, the world’s largest miner of the metal, said Jan. 15 it may fire as many as 14,000 workers as it idles four shafts. Production cutbacks may curb South Africa’s exports, preventing the rand from gaining even as commodity prices rise, said Mohammed Nalla, head of strategic research at Nedbank Group Ltd. Economic growth in China, the biggest buyer of South African raw materials, accelerated for the first time in two years in the fourth quarter.
“We are likely to see the rand remain on the back foot,” Nalla said by phone from Johannesburg. Lower mining output and labor unrest are “weighing on what we are actually able to put out into the market and that may compromise our ability to take advantage of a turnaround” in commodity prices, he said.
Metals and other minerals accounted for 61 percent of South Africa’s exports in the first 11 months of 2012, according to government data. The trade deficit in the same period was 112.7 billion rand ($13 billion), more than six times bigger than a year earlier, undermining the rand.
“Pressures on the trade and current accounts will remain well entrenched for a while to come,” Quinten Bertenshaw, a Johannesburg-based analyst at ETM Analytics, said in e-mailed comments. “There are very few reasons to turn overly optimistic on the prospects for the rand.”
Foreign investors sold a net 1.2 billion rand of South African stocks and bonds yesterday, according to data from JSE Ltd., operator of the nation’s stock and bond exchanges. The nation’s purchasing managers’ index unexpectedly fell in December top 47.4 from 49.5 amid concern about rising unemployment.
More than 40 people died last year at Lonmin Plc’s Marikana platinum mine, the worst mining violence since the end of apartheid in 1994. Work stoppages in the platinum and gold industries cost the economy more than 10 billion rand in 2012 and will shave about 0.5 percentage point off gross domestic product, according to the Treasury. The economy probably expanded 2.5 percent last year, the slowest pace since a 2009 recession.
The rand’s three-month implied volatility against the dollar climbed 35 basis points today to 12.90 percent, indicating that options traders see wider swings in the currency in coming months.