Johannesburg - The rand strengthened against the dollar on
Wednesday, reversing recent weakness after striking miners at platinum producer
Lonmin [JSE:LON] accepted a pay offer, ending a violent six-week strike that shook
investor confidence.
The rand was up 0.25% at R8.16 to the dollar by 06:04 GMT
compared with a R8.1795 close in New York on Tuesday.
The unit has made 1.5% worth of gains since striking workers
at Lonmin’s Marikana mine accepted the offer on Tuesday that ends labour
clashes which killed 45 people and induced a sell-off in the rand.
The next technical barrier for the rand will be around the
R8.12 region, its September 11 high and a level it also bounced from in early
August.
“The crucial R8.1200 level is now within grasp and continued
demand for rand from offshore should see this hurdle overcome today,” said
Warrick Butler, a rand trader at Standard Bank.
The rand should come out from under the cloud of the Lonmin
strikes to end the week stronger than the dollar, which is still under pressure
after the US Federal Reserve announced monetary easing last week.
Investors also remain jittery about the prospects of illegal
strike action spreading with the Lonmin settlement, which will see pay hikes of
up to 22%, seen as a red rag for other discontented workers.
“Lonmin’s wage settlement with the Marikana workers already
helped the rand marginally stronger yesterday. It’s not all rand positive
though: the ability of the workers to extract a hefty pay rise risks further
wildcat strikes across the industry,” RMB cautioned in a note to
investors.
Government bonds were firm with yields down four basis
points at 5.39% on the 2015 benchmark and 4.5 basis points at 7.475% on the
2026 issue, rallying late on Tuesday as news of the Marikana wage offer came
in.
Yields should continue to be supported in the session,
unless inflation data prints much higher than market expectations of 5%.
Headline CPI was at 4.9% in July, which was likely the
bottom of the cycle, and should tick up in August as food and oil prices
increase.
The number will also be key for the South African Reserve
Bank’s repo rate decision on Thursday. The Monetary Policy Committee is in day
two of three-day deliberations to decide on policy, where expectations are for
rates to remain unchanged.
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