Fin24

Rand firms, bond yields decline

2012-10-16 09:29

Johannesburg - The rand was a touch firmer against the dollar on Tuesday but remained vulnerable to labour unrest that has sent the currency plunging over the past several weeks.

By 06:43 GMT, the rand was trading at R8.770 to the greenback, slightly stronger than Monday's New York close of R8.7841.

Investors have been encouraged by some firms taking tough measures against wildcat strikers who have paralyzed parts of the mining sector responsible for about 6% of GDP.

Kumba Iron Ore [JSE:KIO] late on Monday fired more than 100 strikers who halted operations at its giant Sishen mine and threatened to destroy equipment worth hundreds of millions of dollars.

"Long to medium term, the rand may be considered weak or under-valued, but I think with the negative sentiment out there, the vulnerable side is for the rand to weaken further," said Garth Klintworth, head of fixed income, commodities and currencies at Absa Capital.

Standard & Poor's cut South Africa's credit rating one notch after trading ended in Johannesburg on Friday, saying strikes and social tensions could reduce fiscal flexibility and hurt growth in the continent's biggest economy.

In a move that raised the stakes, striking gold miners refused the industry's latest pay rise on Monday, dimming hopes that the illegal strike in the sector will end soon.

The yields on the three-year benchmark and that for the 14-year issue were 2 basis points lower to 5.41% and 7.780% respectively.

Treasury will sell a total of R2.1bn over a range of its 2023, 2041 and 2048 government bonds in the session. Results are due after the auction closes at 09:00 GMT.