Rand rebounds, metal strike hurts

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NewRandMoney Reuters.

Johannesburg - South Africa's rand steadied on Friday, pulling back from losses in the previous session that saw the currency fall to two-week lows against dollar, undermined mainly by a nationwide strike by metal and engineering workers.

The rand fell as low as 10.84 versus the dollar on Thursday as South African police fired rubber bullets to disperse workers who blocked the entrance to the construction site of state power utility Eskom's Medupi power station.

However, by the close of Thursday's session in New York it had recouped losses to finish at 10.7490.

By 08:17 SA time on Friday the rand retained the positive momentum, strengthening 0.18 percent to 10.7300 a dollar.

More than 220,000 workers led by union Numsa are demanding wage increases of between 12 and 15 percent - at least double the official inflation rate.

The strike, which affects vital sectors of the economy including the construction of much-needed power plants, is estimated to cost South Africa around 300 million rand ($28 million) a day in lost output.

Coming on the back of a crippling 22-week strike in platinum sector and negative GDP growth in the first quarter of 2014, ratings agency Moody's remarked that the relentless labour unrest would consign South Africa to a third consecutive year of sub-par growth.

“The possibility of further sovereign rating downgrades in 2H14 remains high,” Mamello Matikinca of Rand Merchant Bank said in a morning market note.

Matikinca added that the strikes would “negatively impact the delivery of the much needed power stations which have impeded growth”.

Government bonds were slightly firmer, with the yield on the paper maturing next year shedding 2.5 basis to 6.735 percent, while the longer benchmark bond due in 2026 also dropped 2.5 basis points, to 8.390 percent. - Reuters

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