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Rand stutters as electricity crisis weighs

Caution prevailed among investors as South Africa’s power utility Eskom said it would continue implementing power cuts on a rotational basis as it struggles with generating capacity shortages.

Picture: EWN

JOHANNESBURG - The rand edged lower on Wednesday, lagging gains in its emerging market counterparts, as the prospect of rolling blackouts and bleak demand for local currency dented sentiment.

At 0630 GMT, the rand was 0.07% weaker at R14.5050 per dollar from a close of R14.4950 overnight in New York.

Caution prevailed among investors as South Africa’s power utility Eskom said it would continue implementing power cuts on a rotational basis as it struggles with generating capacity shortages.

Analysts say power cuts, which have happened in several rounds since June last year, are one of the reasons why business confidence has slumped in recent months.

Most emerging market currencies advanced as investors expect the US Federal Reserve to strike a dovish tone and maintain the interest rates at its policy meeting decision later in the day.

Those gains, however, were capped by renewed tension in US-China trade negotiations overnight after reports that some US officials were concerned China was pushing back against Washington’s demands in trade talks.

The rand has stuttered all week and is unlikely to be buoyed by an expected tame inflation print due at 0800 GMT, with investors deterred by a deepening crisis at state firm Eskom, which said on Tuesday it will continue power cuts as it battles capacity shortages.

The situation worsened on Saturday after Eskom lost its electricity imports from the Cahora Bassa hydroelectric system in Mozambique, which contributes more than 1,000 MW to the South African grid, after a powerful cyclone.

Bonds weakened, with the yield on the benchmark government paper due in 2026 adding 6.5 basis points to 8.825%.

Stocks were set to open lower at 0700 GMT, with the JSE securities exchange’s Top-40 futures index down 0.41%.

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