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Rand flat, hovers near 2-month low

The currency slipped to R15.0000 to the dollar on Tuesday, its weakest since 7 June, after rating agency Moody’s said struggling state power utility Eskom urgently needs a turnaround plan as its capital structure is unsustainable.

Picture: EWN

JOHANNESBURG - The rand was flat in early trade on Wednesday, hovering near two-month lows as it struggled for momentum amid fears over a sovereign rating downgrade and the trade war between China and the United States.

At 0620GMT, the rand traded at R14.9300 per dollar, unchanged from its close on Tuesday.

The currency slipped to R15.0000 to the dollar on Tuesday, its weakest since 7 June, after rating agency Moody’s said struggling state power utility Eskom urgently needs a turnaround plan as its capital structure is unsustainable.

Eskom said last week it expects to make a R20 billion ($1.34 billion) net loss in the current 2019-2020 financial year after the 20.7 billion rand loss in 2018-2019, exposing the country’s public finances to grave risks at a time of fiscal constraints.

The government has proposed giving Eskom a R59 billion cash injection over the next two financial years, in addition to R230 billion of bailouts spread over the next decade.

Moody’s, scheduled to review South Africa’s rating in November, is the last of the three big international ratings agencies to have South African debt at investment grade.

“Their concerns are worrisome as being the only house not to have us on non-investment grade could change come November,” Oliver Alwar, senior trader at Standard Bank, said in a note.

South Africa’s rating with S&P Global Ratings and Fitch has been non-investment grade since 2017.

In fixed income, the yield on the benchmark government due in 2026 dipped 4 basis points to 8.39%.