Rand Weakens for Worst Stretch in Five Months on Labor Unrest

The rand weakened for a sixth day against the dollar, the longest stretch of losses in five months, on concern renewed labor unrest at South African platinum mines will dent exports and widen the trade deficit.

The world’s three largest platinum producers are at risk of simultaneous labor strikes as unions fail to reach an agreement over pay at Lonmin Plc, Impala Platinum Holdings Ltd. and Anglo American Platinum Ltd. South Africa posted a wider-than-estimated trade deficit in September after strikes halted production at carmakers, mines and building companies, a report showed yesterday. The rand extended its decline after a U.S. manufacturing gauge beat analysts’ estimates in October.

“The threat of new labor unrest at some of the platinum mines is weighing on the rand,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg. “The worry is that we’re not capitalizing on the weak rand because of labor unrest. We’re not producing enough goods so we can’t grow our exports.”

The rand retreated as much as 1.4 percent to 10.1855 per dollar, the weakest level since Sept. 5. It traded at 10.1828 as of 4:20 p.m. in Johannesburg, bringing its loss this week to 3.6 percent, the worst among 16 major currencies, according to data compiled by Bloomberg. Yields on benchmark bonds due December 2026 rose 12 basis points, or 0.12 percentage point, to 8.16 percent, extending their worst week since June 21.

SABMiller Plc, the world’s second-biggest brewer, said some of its South African employees have had their houses firebombed and cars burned as a five-week strike over wages turned violent. The trade gap in Africa’s biggest economy was 18.9 billion rand ($1.9 billion) in September, wider than the median 16.4 billion-rand estimate of 12 economists in a Bloomberg survey.

Manufacturing Gauge

The trade deficit is putting pressure on South Africa’s current account, undermining the rand, said Theuns de Wet, head of global markets research at Rand Merchant Bank in Johannesburg. The nation’s current-account shortfall will average 6.5 percent of gross domestic product this year, the Treasury forecast last week.

“The serial negative surprises in the trade data suggest that the current-account deficit could take longer to adjust,” De Wet said in an e-mail today. The rand’s decline was hastened by speculation the Federal Reserve will start cutting asset purchases as soon as December after jobless claims fell in the week ending Oct. 31, he said.

The U.S. ISM Manufacturing gauge rose to 56.4 last month from September’s 56.2. It was the fastest pace since April 2011, beating the 55 median estimate in a Bloomberg survey of economists. Readings above 50 indicate expansion.

South Africa’s purchasing managers index advanced to 50.7 in October, Kagiso Tiso Holdings in Johannesburg said today in a report, compared with 49.1 in the previous month.

The Fed’s Open Market Committee maintained its $85 billion in monthly bond purchases this week that propelled investors’ demand for emerging-market assets in countries such as South Africa. The committee removed a sentence from its previous policy statement saying tighter financial conditions could slow an improvement in the economy.

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