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Rand steady but labour worries remain

Jan 09 2013 09:49 Reuters
Rands

(File) (Shutterstock)

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Johannesburg - The rand was stuck within a narrow range against the dollar on Wednesday, with investors shying away from the currency ahead of an expected strike in the fruit growing region of Africa's largest economy.

Dealers expect thin trade in the market as some market players have yet to return from a holiday break.

Thousands of farm workers in the Western Province, among the lowest paid in the country, will resume a strike for better wages on Wednesday. The previous strike resulted in two people dying and burnt vineyards in November.

At 08:49, the rand was at R8.5752, slightly firmer but not too far off its close in New York on Tuesday. 

"The potential for rand strength is being curtailed by a firmer dollar environment, as well as some renewed domestic labour tensions in the mining and farming sectors," said Michael Keenan, forex strategist at Absa Capital.

The prospect of a violent protest is keeping investors wary of selling dollars and that is likely to keep the currency in the R8.61-R8.55 range.

The rand would need to break R8.55 resistance to move out of the range and open up further gains.

"In the last couple of days we've seen a rise in the dollar index. It's to do with the safe haven aspect of the dollar, people are a little nervous; we've avoided the fiscal cliff but we've got this debt ceiling coming to a head soon," Keenan said.

The United States will have to debate raising the government's borrowing limit in the next few weeks, which is likely to see volatile, headline-driven trade. 

The South African car manufacturers group will release numbers on new vehicle sales during December, at 11:00.

Car sales continued to show solid growth through most of 2012 as low interest rates and a growing middle class in Africa's largest economy accumulated cars even as the economic growth slowed and one in four South Africans were without work.

The data is due at 11:00 and should give an indication of whether sales reached a 10% growth target mark for 2012.

An index gauge on business confidence in the last month of 2012 is due at 11:30 and may show businesses to be worried about labour unrest in South Africa.

Yields on government bonds were down 1 basis point on the benchmark bonds to 5.3% on the 2015 note and 7.205% on the 2026 issue. 

Debt dealers expect they will follow moves on the rand as trading has not fully recovered from the holiday lull.

Government will announce issuance plans for its second auction of the year next week, at 11:00.
 

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