Rand Slips From Three-Week High as Jobs Data Weighs on Economy

The rand retreated from a three-week high against the dollar after a decline in formal-sector employment added to evidence that an expansion in Africa’s biggest economy is struggling to gain momentum.

South Africa’s currency slipped as much as 1.2 percent and traded 1.2 percent at 8.9332 per dollar at 4:29 p.m. in Johannesburg. The rand climbed as much as 1.2 percent yesterday to the strongest level since Jan. 17. Yields on benchmark 10.5 percent bonds due December 2026 dropped 3 basis points, or 0.03 percentage point, to 7.33 percent.

South Africa’s unemployment rate, the highest of 39 emerging markets tracked by Bloomberg, declined to 24.9 percent in the fourth quarter, from 25.5 percent the previous three months, as people gave up seeking work, Statistics South Africa said yesterday. The economy shed 52,000 formal jobs, outweighing the 8,000 gain in informal employment. High unemployment will pressure the central bank to cut borrowing costs to boost the economy, according to Standard Bank Group Ltd.

“These results are still consistent with economic weakness and, to our minds, declining momentum in household consumption spending growth,” Bruce Donald, a Johannesburg-based currency strategist at Standard Bank, Africa’s largest bank, said in an e-mailed note to clients. This keeps “in play” the chance of a rate cut, possibly in the third quarter, he said.

South Africa’s jobless rate may rise in 2013 as mining companies including Anglo American Platinum Ltd. finalize plans to dismiss workers after strikes last year reduced output and pay increases raised costs. Work stoppages in the mining, transport and farming industries have curbed exports and growth in Africa’s biggest economy, undermining a government pledge to reduce the unemployment rate to 14 percent by 2020.

‘Back Foot’

The central bank last cut its benchmark rate in July to shore up consumer spending and encourage investment. The economy will probably expand 2.6 percent this year from an estimated 2.5 percent in 2012, the slowest pace since a 2009 recession, according to forecasts from the Pretoria-based Reserve Bank.

“A central bank that faces a choice between doing nothing and cutting rates over the next three to six months is among the factors likely to keep the rand on the back-foot,” Donald said.

The rand extended its decline as commodity prices dropped amid concern political turmoil in Spain and Italy may hamper governments in responding to the euro-area debt crisis that threatens growth and demand.

Spanish Prime Minister Mariano Rajoy faces calls to resign amid contested reports of party corruption, while former Italian Premier Silvio Berlusconi aims to return to office in elections in three weeks. Raw materials from soybeans to crude oil slid as the dollar gained for a second day in three against the euro, making commodities less appealing as an alternative investment.

Raw materials accounted for 53 percent of South Africa’s exports in 2012, according to government data.

“Global currency volatility has returned with a bang,” John Cairns, a currency strategist at FirstRand Ltd.’s Rand Merchant Bank in Johannesburg, said in e-mailed comments. “Commodities have been caught in the global swings.”

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