JOHANNESBURG – South Africa’s rand eased against the dollar yesterday after plunging 3% in the previous session as labour turmoil in the platinum sector forced the world’s largest producer to shut down some of its production.
Report by Reuters
The rand traded at 8,3544 against the dollar, weaker than Wednesday’s New York close of 8,345, after recording its biggest daily plunge in nearly three-months and took the currency to a week-low.
The labour unrest in the mining sector has been rumbling since January, but took root on Wednesday with foreign investors, who were net sellers of local bonds amid concerns the government was powerless to resolve the mess.
“The concerns persist. We are not seeing foreign demand for our bonds and by and large they’re unlikely to participate while there’s uncertainty in the backdrop,” said Brigid Taylor, head of Institutional Sales at Nedbank.
Government bond yields were up three basis points, with the three-year bond yield at 5,52% and that on the longer-dated 14-year paper at 7,445%.
Germany’s Constitutional Court gave the green light on Wednesday for Berlin to ratify the eurozone’s permanent rescue fund, a decision that should underpin the euro – and by extension the rand because of South Africa’s strong trade links with Europe.
Signs of further United States monetary easing by Federal Reserve chairman Ben Bernanke might also help the rand claw back some lost ground.
“The other big thing that we’re waiting for is the Fed’s decision,” Taylor said.
“We expect Bernanke to talk about some form of easing, either pushing out the interest rates hike or any form of hike for an extended period of time and doing some of extended buy-back programme.”