Rand Declines to 4-Year Low as Labor Protests Increases Concern of the Investors

The Rand, South Africa’s major currency has reached its weakest level in the last 4 years, mainly because of the increasing labor protests at the mines across the country. Incidentally, only last year, similar sort of violent situation curbed the production of South Africa, the biggest economy in the African content.

Rand declined by around 0.7% at one point of time of the day to reach 9.1884 per USD, the lowest intraday level since April, 2009. However, at later point of time in the day, it increased a bit and ultimately was trading 0.1% lower at 9.1362 per USD at the time of close. When it comes to the yields on the benchmark Government 10.5% bonds due in December, 2026, the same increased by 3 basis points and went to 7.338%.

Exxaro Resources’ tools were downed by the workers at Arnot and Matla mines of the company. The news was announced through a statement of the company. Incidentally, in last August, South Africa was rocked by labor unrest throughout the country, following a wage dispute at the Marikana mines of the Lonmin Plc. During the protests, 34 people were shot dead by the South African police.

The Chief Dealer of Bidvest Bank Ltd., Ion de Vleeschauwer, stated that the labor disruptions in South Africa are putting pressure on a continuous basis on the Rand. He added further that Exxaro is the latest addition to the list now. Incidentally, more than two-thirds of the total exports in South Africa are accounted by the mining operations. South Africa is also the biggest gold producer in the entire African region. Mining accounts for around 9% of the total Gross Domestic Product of South Africa.

In 2013, Rand is currently the 3rd worst performing currency, only behind Japanese Yen and British Sterling, if the major currencies across the world are considered. Ion de Vleeschauwer does not think that Rand has any chance of appreciating in near future. He added that the currency is not cheap at these levels.

On the other hand, the Manager of Fixed Income Securities Department of Investec Asset Management, Malcolm Charles, stated that now 9.25 Rand is cheap, whereas, 8.75 Rand is the new expensive Rand. Incidentally, the 3-month volatility of Rand against the greenback has increased to 13.04%. Only on yesterday, it was at 12.83%.