Rand falls to week's low vs dollar

The local unit hit R10,6800 to the dollar on news of a fresh strike by Numsa.

New strike action bodes ill for a recovery in an economy that contracted in the first quarter. Picture: Taurai Maduna/Eyewitness News

JOHANNESBURG - The rand fell to a week's low against the dollar after South Africa's largest union on Thursday announced an indefinite work stoppage from 1 July, in pursuit of higher wages.

The National Union of Metalworkers of South Africa ( Numsa) union, which represents metal workers and other mostly skilled employees, said a strike over its wage demands was inevitable, even though the government says it will make sure the strike does not happen.

But the government's ability to influence decision may be limited, as the union, once a political ally of the ruling African National Congress (ANC), has fallen out with the party.

It demanded President Jacob Zuma resign and refused to campaign for the ANC in elections this year because of disagreements over policy.

The rand weakened on the news to the week's low so far. It hit 10.6800/dollar, off a 10.5945 close in New York on Wednesday.

The n ew strike action bodes ill for a recovery in an economy that contracted in the first quarter.

"The announcement of more large-scale strike action has helped to ensure that the rand is under-performing all emerging market currency peers so far today," Tradition Analytics said in a market note to clients.

The rand was one of the weakest performers in a basket of emerging market currencies tracked by Reuters on Thursday, with peers having found support from weaker-than-expected first-quarter US growth data released on Wednesday.

Domestic data showed inflation expectations from analysts, business people and trade unions in the second quarter were unchanged from the first three months of the year.

Yields on government bonds were little moved, nudging down one basis point on the benchmark 2026 issue to 8.325 percent.

The rand rallied against the dollar three days ago after a crippling five-month strike in the platinum mines ended on Monday, taking the currency to its strongest in two weeks.