Rand Weakens to Breach 11 Per Dollar for First Time Since 2008

The rand fell, breaching 11 per dollar for the first time since October 2008, on concern a pay strike at the world’s biggest platinum mines and a manufacturing contraction in China will dent South African exports.

The platinum strike will disrupt operations accounting for about 70 percent of global output of the precious metal, South Africa’s biggest single overseas shipment. Manufacturing in China, the biggest buyer of South African raw materials, may contract for the first time in six months. The Turkish lira’s slump to a record low prompted investors to sell emerging-market assets and Argentina’s peso extended its biggest loss in 12 years after the central bank scaled back intervention, exacerbating the rand’s decline.

“We’re getting hit by a double whammy, because we’re an emerging-market currency and we’re a commodity-heavy currency,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg. “The Chinese story started us off on a weaker footing, and then we saw emerging-market currencies across the board selloff aggressively, with Turkey being the big driver.”

The rand retreated as much as 1.2 percent to 11.0011 per dollar. It traded 0.9 percent lower at 10.9713 per dollar by 5:54 p.m. in Johannesburg. Yields on benchmark rand bonds due December 2026 rose nine basis points, or 0.09 percentage point, to 8.5 percent, the highest on a closing basis since Dec. 4.

Ruling Postponed

Members of the Association of Mineworkers and Construction Union at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc, the three largest producers, didn’t clock in for duty today, AMCU Treasurer Jimmy Gama said by phone. The union agreed to meet with industry and government negotiators tomorrow for talks aimed at ending the strike.

The AMCU’s plan to start a strike at South African gold mines today was delayed after the Johannesburg Labour Court postponed its ruling on whether the stoppage would be protected to Jan. 30. When South African strikes have this status, workers can down tools without being fired or disciplined.

A two-day strike in September by the National Union of Mineworkers, which represents two-thirds of the industry’s 107,000 gold miners, cost companies mining the metal as much as 349 million rand ($32 million) a day in sales, according to the Chamber of Mines.

“Positivity in the rand seems to be short-lived, with industrial action in the platinum sector weighing on the local economy,” Thando Vokwana, a fixed-income trader at FirstRand Ltd. in Johannesburg, said in an e-mail. “It seems brakes have been applied to the world’s growth engine, with the latest flash PMI reading showing a cool-down in Chinese and global demand, erasing the rand gains made yesterday.”

Turkish Losses

The preliminary reading of 49.6 for January in China’s Purchasing Managers’ Index released today was below a final figure of 50.5 in December and all 19 estimates of analysts in a Bloomberg survey. A number above 50 indicates expansion.

China is South Africa’s biggest trading partner, buying 11 percent of the the nation’s exports from January to November, according to government data.

The Turkish lira fell to a record today after the central bank made an unscheduled intervention in the market.

South Africa’s central bank won’t follow Turkey’s example as it has a stated policy of non-intervention, and doesn’t have enough foreign reserves to intervene even if it wanted to, Nedbank’s Nalla said.

“That explains some of the rand’s underperformance,” he said.

Foreign investors bought a net 310 million rand of South African bonds yesterday, paring outflows this month to 5.32 billion rand, according to JSE Ltd. data. Investors abroad purchased 853 million rand of equities.

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