South African Rand currency update

January 17, 2013 - Written by David Woodsmith

STORY LINK South African Rand currency update

The South African Rand has strengthened for a second day against the US Dollar after striking workers from the nation’s key mining and farming sectors went back to work. The move has eased investor concerns that the nations labour problems will worsen.

Anglo Platinum, the biggest producer of Platinum in the world announced that employees have returned to work today at its operations in RustenBurg and Pilanesberg. The strikes were launched after the company announced that it would close idle mines and slash up to 14,000 jobs.

The endless rand weakness may be ending,” Josina Solomons, currency strategists at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “The immediate risk seems to be further industrial action but there is nothing obvious that could drive negative headlines today.”

According to South Africa’s largest labour group, most of the striking farm workers in the Western Cape Province also agreed to return to work, suspending their actions for a week to allow further wage negotiations to take place.

So far this year the Rand has weakened by as much as 3.6%. The credit ratings cut by Fitch and concerns that the current-account shortfall will widen as strikes curbed exports. According to government data, 61% of the African nation’s exports were comprised of minerals and metals. As a result of the strikes the trade deficit in the same period was 112.7 billion rand ($13 billion), more than six times bigger than a year earlier.

Many investors and economists are predicting that the currency could see a strong rebound if the labour troubles are resolved.

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TAGS: American Dollar Forecasts South African Rand Forecasts