Rand Weakens to Four-Year Low as Labor Protests Spur Concern

The rand reached its weakest level in almost four years as labor protests at mines spurred concern of a repeat of violence that curbed production last year.

The currency of Africa’s biggest economy lost as much as 0.7 percent to 9.1884 per dollar, the lowest intraday level since April 2009, and traded 0.1 percent lower at 9.1362 by 4:22 p.m. in Johannesburg. Yields on benchmark government 10.5 percent bonds due December 2026 rose three basis points, or 0.03 percentage point, to 7.338 percent.

Workers downed tools at Exxaro Resources Ltd.’s Matla and Arnot mines, the company said in a statement today. South Africa has been rocked by labor unrest following a wage dispute at Lonmin Plc’s Marikana operations in August, which led to 34 people being shot dead by police.

“There is continued pressure on the rand from labor disruptions,” Ion de Vleeschauwer, the Johannesburg-based chief dealer at Bidvest Bank Ltd., said by phone. “Exxaro also has issues now.”

Mining accounts for two-thirds of exports in South Africa, the continent’s largest gold producer, makes up about 9 percent of gross domestic product and directly employs about 500,000 of the nation’s 51.8 million people.

The rand is the third-worst performing currency this year, behind the Japanese yen and British pound, among 16 major currencies tracked by Bloomberg.

An appreciation of the rand in the short term is “unlikely,” de Vleeschauwer said. The currency isn’t cheap at these levels, he said.

“9.25 rand is a cheap rand and 8.75 rand is the new expensive rand,” Malcolm Charles, who helps manage about $3.3 billion in fixed-income securities at Investec Asset Management, said at a presentation in Johannesburg today.

The rand’s three-month implied volatility against the dollar rose to 13.04 percent, from 12.83 yesterday.

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