South African rand falls on power cuts, risk-off sentiment

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South African rand falls on power cuts, risk-off sentiment

1:53 CAT | 06 Sep 2023

File photo: Reuters

The South African rand weakened on Wednesday, as the country continued to be battered by its worst rolling blackouts on record and as markets moved away from riskier assets.

At 1110 GMT, the rand traded at 19.2575 against the dollar ZAR=D3, 0.3% weaker than its previous close.

The dollar =USD last traded around 0.09% weaker against a basket of global currencies.

“The rand has struggled for any traction through the first half of the week,” said Danny Greeff of ETM Analytics, as sentiment towards riskier currencies like the rand soured.

“Simultaneously, there is very little in the way of positive news flow out of South Africa for investors to focus on.”

South Africa’s struggling state utility Eskom reinstated the worst rolling blackouts on record, which mean up to 12 hours of power cuts for most households per day.

Adding fuel to the fire, petrol and diesel prices were also hiked on Wednesday, hurting Africa’s most industrialised economy.

This exacerbates the country’s fiscal crisis and deters investment in the rand and government bonds, Greeff added.

On the Johannesburg Stock Exchange, the blue-chip Top-40 .JTOPI and the broader all-share .JALSH indexes were both last trading over 0.9% weaker.

South Africa’s benchmark 2030 government bond ZAR2030= was stronger, with the yield down 4 basis points to 10.370%.

Source: Reuters