Pound Rand Exchange Rate (GBP/ZAR) Lower as Forecasts Predict Further Weakness

June 24, 2014 - Written by David Woodsmith

STORY LINK Pound Rand Exchange Rate (GBP/ZAR) Lower as Forecasts Predict Further Weakness

The Pound to Rand exchange rate (GBP/ZAR) saw addtonal losses today and the South African was pushing back towards a two-week high against the US Dollar on Tuesday as the currency found support from the ending of a crippling five-month long strike in the platinum mining sector.

Yesterday saw members of South Africa’s largest platinum mining union agree to a wage settlement the will bring an end to the strike which many blame for causing the South African economy to contract in the first quarter of the year and lose its place as Africa’s wealthiest economy.

The strike was the longest in South African history and has left labour ties in ruins. Several miners were murdered or attacked over the dispute.

The Pound to Rand exchange rate is currently 0.44 per cent lower on the day at 17.97661 GBP/ZAR.

The deal reached will see miner wages increase but falls short of the initial demand by the union for a tripling of pay. Instead annual Pay will increase by around 1000 Rand per month for a three year period.

President of the AMCU Joseph Mathunjwa said that the union will sign the deal today and mine workers can return to work on Wednesday.

Holding a rally in a stadium at Rustenburg a crowd of thousands of miners roared their approval that a deal had finally been reached. The agreement will apply only to members of the AMCU, which accounts for roughly 80% of employees at the main platinum companies.

The strike inflicted massive damage onto the South African economy and cost the mining companies $2 billion in revenue over the five month period. Economists blamed the strike for the 0.6% contraction of the national economy seen at the start of the year and were one of the key causes for South Africa to be replaced by Nigeria as Africa’s largest economy.

The strike has also highlighted the fiery relationship between the unions and companies and could put investors off investing in the nation.

The reprieve seen as a result of the disputes ending could only be temporary however, as investors warned that the increase in platinum production could put more pressure upon South Africa’s already faltering power grid. Rolling blackouts are common and productivity is at risk of falling.

“The good news is that the strike has ended. An additional concern is that the increased activity in the platinum sector will add to the existing strain in the power grid, with Eskom recently warning of tight supply,” said Carmen Nel of Rand Merchant Bank in a market note to clients this morning.

Pound Sterling exchange rate falls on interest rate comments

The Pound meanwhile fell after Bank of England Governor Mark Carney said that a rise in UK interest rates will be limited and gradual, his comments disappointed investors.

In his testimony before parliament’s Treasury committee, Carney said that the "exact timing" of a rate increase "will be driven by the data. The most important aspect of the guidance that we're giving is that our view is that the increases in rates over the forecast horizon, in our best estimation, will be limited and gradual," Carney said.

The Pound was also being weakened as investors embarked on a round of profit taking ahead of Thursday’s GDP data release. Thursday also sees the release of the latest South African PPI data.

Latest Rand Exchange Rates (Sending Money to South Africa) - 25th June 2014

The Pound Sterling to South African Rand exchange rate is trading down -0.44% at 17.97661 GBP/ZAR.
The Euro to South African Rand exchange rate is trading down -0.27% at 14.42810 EUR/ZAR.
The US Dollar to South African Rand exchange rate is trading down -0.5% at 10.58058 USD/ZAR.

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