JOHANNESBURG (Reuters) - South Africa’s rand will slip a bit more over the next year, in part because of persistent tensions in the mining industry but also reflecting investors’ response to the eventual withdrawal of U.S. stimulus cash.
A Reuters poll taken this week follows a pattern of weakness in emerging market currencies, like India’s rupee, in favor of the dollar. <INR/POLL>
The poll of 30 analysts shows the rand slipping about one percent to 10.00 per dollar in six months time, from 9.765 currently, and recovering a touch to 9.975 in 12 months. It shed over 15 percent in the first half of 2013.
In July the currency started firming on signs of an improving economy, but the overall picture is that South Africa’s economic growth will remain subdued by labor tensions in a union turf war.
Anisha Arora, analyst at 4Cast, said the rand is “vulnerable to renewed bouts of strike action and a prolonged tough wage negotiation season in the short term.”
Mining production contracted 6.2 percent in June. Wage talks in the gold sector pose a major risk.
Africa’s biggest economy remains on course to expand by 2.2 percent this year but analysts in a Reuters poll published this week shaved 0.1 percentage point off their forecasts for next year to 3.0 percent.<ECILT/ZA>
Some Fed policymakers have suggested the U.S. central bank could start to scale back its cash stimulus as soon as September. This will depend on a further improvement in the U.S. job market.
Much of the Fed cash had found its way into emerging market assets. As these flows are reversed, “Fed quantitative easing tapering expectations should keep South African government bond yields squeezed,” added Arora, which in turn puts pressure on the currency. <FED/R>
Reporting by Vuyani Ndaba; Editing by Ruth Pitchford