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Rand on track for further losses as strike looms

Breaching the key 10.0 barrier as a possible resumption of mining strikes cast a shadow over the economy.

South Africa‘s rand weakened against the dollar on Thursday, breaching the key 10.0 barrier as a possible resumption of mining strikes cast a shadow over Africa‘s biggest, but struggling economy.

A weaker rand has been a key driver of inflation this year, with headline producer inflation accelerating to 6.7 percent year-on-year in August from 6.6 percent in July, according to data on Thursday.

The local currency was changing hands at 10.0050 per dollar by 1600 GMT, 0.17 percent softer than its New York close on Wednesday.

The rand has given back last week’s strong gains which propelled it to four-month highs against the greenback. The gains came after the U.S. Federal Reserve unexpectedly said it would not prune its asset-buying programme, a key source of cheap dollars for emerging markets.

Higher-yielding but riskier assets like the rand could come under renewed pressure as fears mount that players across the U.S. political divide might fail to agree on a new debt ceiling, putting recovery of the world’s largest economy in jeopardy.

On the local front, members of South Africa‘s Association of Mineworkers and Construction Union (AMCU) at Anglo American Platinum are set to down tools on Friday to protest job cuts.

“The growing possibility of more domestic strikes in the mining sector later this week (is) also conducive to a weaker rand,” analysts at Absa Capital said.

In fixed income, government bonds weakened slightly across the curve, with yields edging higher.

The heavily traded 2026 issue added one basis point to 7.925 percent and the 2015 paper was up two basis points at 6.02 percent.

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