The rand weakened against the dollar, extending this month’s worst drop among major currencies, on concern labour disputes at platinum mines will weigh on South Africa’s current-account deficit.
About 7 000 workers continued a strike that started on November 3 at Northam Platinum's biggest mine, the National Union of Mineworkers said. Pay talks continue at three other platinum mines that produce more than 70% of the world's output.
South Africa needs foreign investment to plug a current-account shortfall that may average 6.5% of economic output this year, according to government estimates. "The rand remains a victim of poor local fundamentals as well as the mining labour unions," Mohammed Nalla, head of strategic research at Nedbank Group, said in e-mailed comments.
Labour disputes do "little to instill confidence in the already faltering economy", he said.
The rand dropped 0.5%to 10.18 per dollar as of 11.11am in Johannesburg on Tuesday, bringing its decline this month to 1.4%. Yields on bonds due December 2026 dropped one basis point, or 0.01 percentage point, to 8.09%.
South Africa’s currency will probably trade between 10.05 and 10.25 per dollar on Tuesday, Nalla wrote. A sustained decline above 10.20 per dollar may trigger a slump to 10.50, he said.
Foreign investors sold a net R977-million of South African bonds and R436-million of stocks on Monday, according to JSE data. – Bloomberg