As emerging-market assets floundered the Rand dropped against the Pound and hit fresh historic lows against the US Dollar.
The mining sector strike, which has been hanging over the Rand all week, began today and the Rand hit a fresh five-year low against the US Dollar.
Workers in three of the world’s largest platinum producers, Lonmin, Amplats and Impala Platinum, have been rallied into action by the Association of Mineworkers and Construction Union and are striking over the minimum entry salary for underground employees.
Labour tensions have restrained South Africa’s economic performance over the last few years so more instability is the last thing the struggling nation needs.
China’s less-than-impressive manufacturing figures turned investors away from commodity-linked assets and news that foreign investors disposed of 4.4 billion Rand of local bonds yesterday also contributed to the currency’s decline.
In the words of currency strategist John Cairns; ‘Global markets have suffered a severe bout of risk aversion. The risk is that the Rand has reattached to other troubled emerging-market currencies. Practically, this means that if the Lira runs again, the Rand could be dragged in its wake.’
Similarly, strategic researcher Mohammed Nalla stated; ‘We’re getting hit by a double whammy, because we’re an emerging market currency and we’re a commodity-heavy currency. The Chinese story started us off on a weaker footing, and then we saw emerging market currencies across the board sell off aggressively, with Turkey being the big driver.’
USD/ZAR declines were exacerbated as investors speculated on the likelihood of the Federal Reserve tapering stimulus when it meets next week.
Meanwhile, the Pound’s gains against the South African Rand were aided as Mark Carney, Governor of the Bank of England, failed to dampen speculation regarding potential UK rate increases.
Next week there are several South African reports to look out for, including the Reserve Bank’s interest rate decision, the nations producer price index and domestic balance of trade figures.
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,18.4116 ,
Euro,,South African Rand,15.2160 ,
US Dollar,,South African Rand,11.0260 ,
Australian Dollar,,South African Rand,9.5799 ,
New Zealand Dollar,,South African Rand,9.0145 ,
Canadian Dollar,,South African Rand,9.7556 ,
[/table]
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