Rand, the major currency of South Africa weakened to its longest losing streak in last 25 years after manufacturing in China slowed down. Incidentally, China is the biggest buyer of raw materials of South Africa. On the other hand, the labor unrest increased the concern of the investors about this African country’s growth before rate decision of Reserve Bank.
Incidentally, Rand is the worst performing emerging market currency for 2013 and it declined for the 11th straight day. Rand is currently trading at the weakest level against USD on a closing basis since March, 2009. On yesterday, around 10,000 textile workers of South Africa announced strike. Apart from that, the comments of the President of the Chairman of Federal Reserve on slowing down monetary stimulus, Ben S. Bernanke, made many investors afraid that the US recovery may be endangered. According to analysts of Investec Asset Management, Rand will probably weaken to 9.86 per USD in the short term before it rebounds. However, no time frame for the same was given by Investec Asset Management. Vivienne Taberer, who works as the Fund Manager of Investec Asset Management, thinks that the weakening of Rand is bit overdone and the positioning is getting stretched further as well. In the medium term, Rand may strengthen to 9.30 per USD, as commented by Taberer.
Rand has tumbled by 12% in 2013. On today, it went down by 0.3% and is at 9.5965 per USD. Yields on the benchmark 10.5% Rand Bonds due in December, 2026 increased by 4 basis points and these are currently at 7.06%.
For the first time in last 7 months, the manufacturing in China probably has contracted in this month, thereby supporting the view that the economic growth of the country is losing stream for the 2nd quarter. Markit Economics and HSBC Holdings released a preliminary reading of 49.6 for the Purchasing Managers’ Index and this is lower than the expectation of 50.4 set by the economists.
Gill Marcus, the Governor of South African Reserve Bank, is going to announce the interest rates of South Africa. Most of the economists believe that the rate will be kept at 5%, a figure that’s the lowest in 30 years. The MSCI Emerging Markets Index declined by 2% and this is expected to experience the biggest decline of the same in last 10 months.