The South African Rand is holding yesterday’s gains after the currency rallied against the Pound and other major peers as relief swept the markets on the news that the five-month long platinum miners’ strike ended.
The Rand was already finding support from the release of data earlier in the session which showed that manufacturing activity in China increased.
Following the release of that report most commodity based currencies saw an upswing.
The Asian nation is a major export destination for South African goods and as such when positive data emerges from the world’s second largest economy the Rand often benefits.
Later in the session the Rand surged as the news broke that the five month long strike in the nations platinum mining sector finally came to an end.
The main platinum mining union announced yesterday that its members agreed to a wage settlement.
Following the announcement the Rand rallied as investors breathed a sigh of relief. The strike has caused considerable damage to South Africa’s economy.
Platinum companies said that the strike has cost them $2 billion in revenue and workers lost $1 billion in unpaid salaries.
The strike was also blamed for the last GDP data showing that the economy contracted by 0.6% in the first quarter of the year.
The strike also affected 45% of the world’s total supply of the precious metal.
South Africa holds around 80% of the world’s known platinum reserves. So far stockpiles have kept the markets supplied with the metal.
Despite the positive news economists are warning that the reprieve could be short-lived as workers in South Africa’s key auto industry are likely to go on strike next week. Concerns over the nation’s power grid are also a potential source of weakness.
“The good news is that the strike has ended. An additional concern is that the increased activity in the platinum sector will pass to the existing strain in the power grid, with Eskom recently warning of tight supply,” said Carmen Newl of Rand Merchant Bank.
The Pound meanwhile is likely to see little movement today due to the lack of domestic data releases.
Updated: 09:25 GMT 25 June 2014
Pound to Rand (GBP/ZAR) Exchange Rate Holding Losses before CBI Data
The Pound to Rand (GBP/ZAR) exchange rate sank to a low of 17.9480 yesterday after shedding 0.38% as the five-month strike in South Africa’s platinum mining sector finally came to an end.
Although there are concerns that it will take the mining sector at least three months to recover, the news was Rand supportive.
However, gains in the South African asset were limited as geopolitical tensions in Iraq and Ukraine threaten to erupt. The reduced levels of risk appetite left the Rand struggling slightly against the US Dollar.
That being said, the Pound to Rand (GBP/ZAR) exchange rate continues to languish in a weaker position, being down 0.38%, and is unlikely to recoup losses unless today’s Confederation of British Industry’s reported sales report delivers a major positive surprise.
The US GDP report, due out later today, may also have an impact on currency market movement.
South African Rand (ZAR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,South African Rand,17.9846 ,
Euro,,South African Rand,14.3644 ,
US Dollar,,South African Rand,10.5524 ,
Australian Dollar,,South African Rand,9.9334 ,
[/table]
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