Rand Tumbles to Four-Year Low as Yields Rise on Rating Concerns

The rand tumbled to a four-year low, extending its longest losing streak in 12 months, on concern that falling metal prices and labor unrest are threatening the nation’s credit rating and economic growth.

South Africa’s rating outlook remains negative and mining strikes may hurt the economy, Moody’s Investors Service said yesterday. The Standard & Poor’s GSCI Index of raw materials dropped for a fifth day as metals, including gold and platinum, declined. The nation is the world’s fifth-largest gold producer and has the largest platinum reserves. Workers at Anglo American Platinum Ltd., the largest producer, threatened to strike if the company doesn’t reverse a plan to cut 6,000 jobs.

“There’s still some tension at the mines,” David Gracey, head of currency and derivatives trading at Investec Ltd., said by phone from Cape Town. “Gold is getting hammered.”

South Africa’s currency depreciated as much as 1.4 percent to 9.3836 per dollar, the weakest level since April 2009. It traded 0.7 percent down at 9.3229 by 3:11 p.m. in Johannesburg, a sixth straight day of losses. Yields on benchmark 10.5 percent bonds due December 2026 rose four basis points, or 0.04 percentage point to 6.86 percent, the highest on a closing basis since April 25.

Employees at Lonmin Plc’s Marikana mine returned to work late yesterday after a two-day illegal strike, the company said today. Rivalry between two labor unions that led to the strike will persist and may cause disruptions at other mines, according to Brigid Taylor, head of institutional flow sales at Nedbank Group Ltd. in Johannesburg.

‘Shaken Industry’

Labor disputes have “shaken the industry and tarnished South Africa’s image as a major international mining investment destination,” Taylor said in e-mailed comments. “The market has not fully priced in the risk of another credit rating downgrade.”

If the strikes aren’t contained, it could weigh on South Africa’s credit rating, Fitch Ratings analyst Carmen Altenkirch told the Johannesburg-based Business Day newspaper on May 14.

The rand has lost 12 percent against the dollar since Moody’s cut the rating by one level to Baa1 on Sept. 27. New York-based Standard & Poor’s lowered South Africa by the same magnitude to BBB on Oct. 12, while Fitch followed on Jan. 10. Moody’s and S&P kept a negative outlook on the rating.

Metals and other commodities accounted for 53 percent of South Africa’s exports in 2012, according to government data. The nation mines 77 percent of the world’s platinum, and is the fifth-biggest gold producer.

The rand’s three-month implied volatility against the dollar has climbed 40 basis points in the past two days to 12.82 percent, indicating that options traders see wider swings in the currency in coming months.

Foreign investors were net sellers of 222 million rand ($24 million) of South African bonds yesterday, according to the JSE Ltd., which runs the nation’s stocks and bond exchanges.

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