By Stella Mapenzauswa
South Africa’s rand fell more than 2.3 percent against the dollar to a 3-1/2 year low in volatile trade on Monday (08/10/2012) as strikes that have hit output in the mining sector continued to hurt investor sentiment.
Government bonds tracked the currency, with traders saying the moves were exaggerated by thin liquidity on a market holiday in the United States.
Investors have been nervous about the outlook for Africa’s biggest economy, keeping local assets under pressure as strikes that began in the platinum mines in August spread to gold and iron ore. A truckers' strike is also in its third week.
Friday’s firing of 12,000 wildcat strikers by the world’s biggest platinum producer, Anglo American Platinum, wreaked havoc, pushing the rand down 3.2 percent in its biggest daily loss since early December.
A renewed attack pushed the currency to 8.9950 on Monday, its weakest since April 2009, according to Reuters data, before it recovered slightly to 8.9605 by 1038 GMT - still down 1.9 percent from Friday’s close.
"It’s all the local news about strikes. All the negativity from last week is ongoing,” said Standard Bank trader Jan Defouw. Trading volumes were thin, adding to the volatility.
The yield on the three-year benchmark rose as much as 15 basis points at 5.57 percent, the highest it has been in three weeks, while that for the 2026 soared 28 basis points to 7.945 percent.
The strikes are building on concerns about domestic politics ahead of an African National Congress (ANC) leadership election in December, and a yawning current account deficit of 6.4 percent for the second quarter.
"Foreigners are just becoming very concerned about the outlook. You’ve got this happening before the big ANC meeting towards the end of the year,” said Jonathan Myerson, head of fixed income at Cadiz Asset Management.
Monday’s moves were somewhat exaggerated as the Columbus Day holiday kept U.S. market players away, said Mohammed Nalla, an analyst at Nedbank Capital.
"At the moment we next see rand support coming in around 9.30,” he said.
Analysts say the rand is also being hit as some investors exit bond markets after South African debt made its debut last week in Citi’s closely tracked WGBI index.
"It’s likely that there has been some capitulation among the fast money community who were still positioning for the WGBI very late after it was announced,” said Roderick Ngotho, a senior emerging markets strategist at RBS in London.
"As South African equities are still holding up, including the resources index, this sell-off in the FX and bonds looks more like a post-WGBI position reduction.” (Additional reporting by Tosin Sulaiman, David Dolan and Shadia Nasralla in London; Editing by Ed Cropley) - Reuters