JOHANNESBURG: South Africa's rand held mostly steady on Monday as a strike that hit the farm belt last week looked set to intensify, posing a risk to agricultural production in Africa's largest economy.
The rand was positioned to trade within a narrow range against the dollar this week after being pushed down in the previous session following a sovereign ratings downgrade by Fitch, which warned of growing social instability and labour unrest.
Dealers expect short covering could benefit the rand at the start of the week, but that manufacturing data on Wednesday may give it a knock.
Unions have warned that farm workers' protests last week in the western grape-growing region were expected grow as workers seek to have their daily wages doubled to 150 rand ($17.13) from about 70 rand presently. Two people died in similar farm protests last year.
At 0634 GMT, the rand was at 8.7200, not too far from its 8.7255 New York close on Friday. It traded at a high of 8.7185 earlier.
"While the downgrade may be fully priced by now, the fact that the strike activity persists and the probability that this week's mining and manufacturing data could disappoint suggest that rand bulls should not become too enthusiastic about the chances of a swift recovery," Absa Capital said in a note.
Several major mining firms have yet to recover from crippling strikes that left more than 50 people dead last year and slowed production in the crucial sector.
The sovereign ratings downgrade may squeeze foreign exchange supply but some traders expect low returns in developed markets to underpin demand for South Africa's higher yielding paper.
The yield for the 13-year benchmark lost 3.5 basis points to 7.130 percent while the yield on the 2015 note was down 2.5 basis point to 5.325 percent.
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