Rand Rebounds From 4 1/2-Year Low Versus Dollar as Gold RisesRobert Brand and Jaco Visser
South Africa’s rand strengthened for the first time in three days, rebounding from a 4 1/2-year low against the dollar, as rising precious-metal prices improved export prospects for the nation’s miners.
Gold climbed to a three-month high in New York, approaching a bull market, as speculation about an attack on Syria within days spurred demand for bullion as a haven. Platinum also gained. The two metals together account for about 20 percent of South Africa’s exports, according to government data. A weaker currency boosts profit for the nation’s miners, whose costs are in rand while revenues are in dollars.
“With the gold price rising, the weaker rand does provide an nice selling opportunity for those miners,” Ion de Vleeschauwer, the Johannesburg-based chief dealer at Bidvest Bank, said by phone. “We’re seeing a bit of exporter selling” of dollars and the rand will remain under pressure in coming weeks, he said.
The currency gained 0.4 percent to 10.3442 per dollar at 5:10 p.m. in Johannesburg, paring its decline this year to 18 percent, the worst after India’s rupee out of 23 emerging-market currencies monitored by Bloomberg. Yields on benchmark 10.5 percent bonds due December 2026 were little changed at 8.52 percent.
The rand fell as much as 1.2 percent to 10.5096 per dollar in earlier trading, the weakest intraday level since March 2009, as strikes spread across the continent’s biggest economy and may involve as many as 335,000 workers after deadlocks in wage talks between employers and the country’s biggest labor unions spread to gas stations and car dealerships.
The U.S., France and the U.K. are considering military action against Syria after concluding the regime used chemical weapons against civilians. The tension has worsened a rout that’s seen global funds pulled out of emerging markets on bets the Federal Reserve will pare stimulus.
“All emerging markets remain under pressure, but labor tensions locally caused that spike above 10.50” per dollar, Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg. “The Syria issue is compounding the emerging-market selloff.”
Tensions over Syria sent oil prices to the highest since February, increasing inflation risks for South Africa, which imports 70 percent of its crude oil. The spot price of Brent crude oil jumped as much as 2.6 percent to $117.34 per barrel, the highest level since Feb. 19 for the generic contract.
“The conflict in the Middle East will dominate risk sentiment for now,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “As long as this is the case, the rand should remain under pressure until there is more clarity on whether a military strike will take place.”
Foreign investors have sold a net 1.68 billion rand ($161 million) of bonds this month, according to JSE Ltd. data. The nation needs about 16 billion rand of foreign investment a month to plug its current-account deficit, according to Standard Bank Group Ltd.
Producer inflation probably climbed to 6.3 percent in the year through July from 5.9 percent the previous month, a report may show tomorrow, according to the median estimate of nine economists in a Bloomberg survey. Consumer inflation accelerated to 6.3 percent in July from 5.5 percent.