JOHANNESBURG: The rand fell 3 percent against the dollar, recording it biggest daily plunge in nearly three months on Wednesday afternoon as New York traders came into a weaker rand and triggered stop-losses that took the currency to a week-low.
South Africa's currency was sold during local trade because of a festering mining strike that has hit the country's platinum belt. On Wednesday, strikers forced the world's biggest platinum producer Anglo American to shut down some of its operations.
By 1632 GMT, the rand was down 2.1 percent to 8.3450/dollar, recovering from a session low of 8.3905 hit when the New York session opened.
Dealers said the local unit was pressured by poor current account data from the previous session, where the shortfall hit its widest gap in four years in the second quarter.
The rand had shrugged off the data in the previous session but events on Wednesday cast doubts in investors' minds about holding South African assets.
"It's a delayed reaction to yesterday's current account data. The spreading mining industrial action played into negative sentiment, and then we just saw stop-losses on that," said David Gracey, a currency trader for Investec.
Continuing mining strife pushed investors who had held on to the rand because of expectations of monetary easing from the United States to drop the currency on Wednesday as mining labour unrest hit sentiment.
Bonds reversed to three-week lows as the currency sold off.
The yields on the benchmarks gave up 12 basis points each to 5.49 percent on the 2015 note and 7.415 percent on the 2026 issue.
However the reaction in the bond market is expected to be temporary as yields continue to be bought by foreigners in anticipation of the country's inclusion into Citi's World Government Bond Index.
Analysts added that South Africa would also still be supported by its solid monetary and fiscal policy.
"I don't think there is such a big shift in the fundamental views as such in the offshore investor base," said Di Luo, fixed income strategist for HSBC.
"But there are some truly concerning factors; the first trigger was the current account deficit yesterday. As a bond investor it doesn't comfort anyone," Luo added, saying she was still recommending people to extend duration on South Africa's bonds because of solid fundamentals.
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