Bloomberg News

Rand Slips From Three-Week High as Jobs Data Weighs on Economy

February 06, 2013

The rand retreated from a three-week high against the dollar after a decline in formal-sector employment added to evidence that an expansion in Africa’s biggest economy is struggling to gain momentum.

South Africa’s currency slipped as much as 0.4 percent and traded 0.3 percent weaker at 8.85986 per dollar as of 10:08 a.m. in Johannesburg. The rand climbed as much as 1.2 percent yesterday to the strongest level since Jan. 17. Yields on benchmark 10.5 percent bonds due December 2026 were unchanged at 7.36 percent after rising six basis points, or 0.06 percentage point, yesterday.

South Africa’s unemployment rate, the highest of 39 emerging markets tracked by Bloomberg, declined to 24.9 percent in the fourth quarter, from 25.5 percent the previous three months, as people gave up seeking work, Statistics South Africa said yesterday. The economy shed 52,000 formal jobs, outweighing the 8,000 gain in informal employment. High unemployment will pressure the central bank to cut borrowing costs to boost the economy, according to Standard Bank Group Ltd.

“These results are still consistent with economic weakness and, to our minds, declining momentum in household consumption spending growth, Bruce Donald, a Johannesburg-based currency strategist at Standard Bank, Africa’s largest bank, said in an e-mailed note to clients. This keeps ‘‘in play’’ the prospect of another interest rate cut, possibly in the third quarter, he said.

South Africa’s jobless rate may rise in 2013 as mining companies including Anglo American Platinum Ltd. finalize plans to dismiss workers after strikes last year reduced output and pay increases raised costs. Work stoppages in the mining, transport and farming industries have curbed exports and growth in Africa’s biggest economy, undermining a government pledge to reduce the unemployment rate to 14 percent by 2020.

The central bank last cut its benchmark rate in July to shore up consumer spending and encourage investment. The economy will probably expand 2.6 percent this year from an estimated 2.5 percent in 2012, the slowest pace since a 2009 recession, according to forecasts from the Pretoria-based Reserve Bank.

‘‘A central bank that faces a choice between doing nothing and cutting rates over the next three to six months is among the factors likely to keep the rand on the back-foot,” Donald said.

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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