The U.S. dollar/South African rand fell below the 100-day simple moving average in trading on September 16, climbed back above on September 25, both on a closing basis, and has tested that average every day since.
The current domestic political issue is the strike at Anglo American Platinum, the world's top platinum producer, in protest at job cuts. Investors are concerned that things could get violent or it portends another vicious cycle of protests. South African Reserve Bank Governor Gill Marcus said Tuesday she is concerned about the impact of strikes, although they have been mostly peaceful this year. Strikes last year in the mining industry and elsewhere were fatal for some strikers and shook investor confidence in Africa's largest economy.
A strike lasting weeks in the auto parts sector, resulting in lost auto production, is continuing though strikes in the gold industry were fleeting. They were fleeting as the settlement agreed to an above average inflation wage increase which is forecast to raise labor costs by $149 million. Not such a cheap fix in the long run.
The rand trading direction will depend like most EM units on when the Fed begins tapering but the local factors should not be overlooked. The South African unit is now looking into strength but any investor discomfort over labor unrest will hurt. And as we have seen in the South African context, these things can spiral out of control quickly.