Bloomberg News

Rand Gains Third Day as Labor Unrest Eases, Bond Inflows Resume

October 11, 2012

The rand appreciated for a third day against the dollar amid signs labor unrest that shut gold and platinum mines and spread to the transportation industry is easing, boosting foreign investor demand for the nation’s bonds.

South Africa’s currency strengthened 0.5 percent to 8.7054 a dollar as of 5 p.m. in Johannesburg. Yields on 6.75 percent bonds due 2021 were unchanged at 6.79 percent after dropping 12 points yesterday.

AngloGold Ashanti Ltd. (ANG), Gold Fields Ltd. and Harmony Gold Mining Co., Africa’s largest producers of the metal, extended an offer to raise the wages of their lowest-paid workers to give unions more time to consider. Members of a labor union representing 8,000 truckers who have been on strike for three weeks said they’re considering a wage offer.

“You can argue that the tide is turning and that potential for positive news flow has increased,” Theuns de Wet, head of fixed-income research at Rand Merchant Bank in Johannesburg, wrote in an e-mailed note to clients. “We are cautiously optimistic that these developments will ease foreign investor concern about investing in the South Africa and set the scene for a resumption of the trend for foreign flows into the domestic bond market.”

Growth Risks

Foreign investors were net buyers of 1.4 billion rand ($166 million) of South African bonds yesterday after selling 4.6 billion rand of debt in the previous three trading days, according to JSE Ltd. data.

The rand pared gains after manufacturing growth slowed in August, limiting growth in Africa’s largest economy. Factory production grew 3 percent, down from a revised 6.3 percent in July, Pretoria-based Statistics South Africa said.

Slowing growth may prompt the central bank to lower borrowing costs, reducing the rand’s yield advantage over the dollar. South Africa’s benchmark central bank rate is 5 percent, compared with 0.25 percent in the U.S.

“The risk to domestic economic growth remains on the downside,” Nicky Weimar, an economist at Nedbank Group Ltd. (NED), wrote in e-mailed comments. “The risk to the rate outlook remains on the downside in the short-term.”

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net


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