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Rand set to end week firmer but stocks drop

The currency hit a one-week high of R17.3325 before trimming the gains, with market sentiment weighed by concerns over the return of power cuts at a time when economic activity is being stifled by the COVID-19 pandemic.

South African rand. Picture: Christa Eybers/EWN

JOHANNESBURG - The rand was set to end the week on a firmer footing, even though its recent rally has been slowed by the return of rolling nationwide power cuts and more signs that the domestic economy remains under pressure.

At 1515 GMT, the rand was 0.26% firmer at R17.3725 per dollar, and was on track for weekly gains of more than 1.5% as it benefited from a weaker US dollar.

The currency hit a one-week high of R17.3325 before trimming the gains, with market sentiment weighed by concerns over the return of power cuts at a time when economic activity is being stifled by the COVID-19 pandemic.

On Friday, state power utility Eskom implemented nationwide rolling electricity blackouts for a second day, cutting up to 2,000 MW from the national grid, after a number of generating units broke down.

“The provision of adequate and reliable power supply is critical to growth, particularly in energy-intensive industries,” RMB analyst Nema Ramkhelawan-Bhana said in a note.

“The road to recovery is fraught with dangers, but energy availability need not be an added constraint.”

Stocks fell, with the Johannesburg Stock Exchange’s Top-40 Index slipping 0.65% to 52,737 points, and the broader All-Share Index dropping 0.6% to 57,077 points.

The heaviest faller on the blue-chip index was Sasol, the world’s top producer of motor fuel from coal, as oil prices gave up much of the rise over the week on doubts over a recovery in demand due to the COVID-19 pandemic as well as rising supplies. Its shares closed 7.36% lower.

Retailer Woolworths lost 1.11% after warning that its annual profit could plunge by as much as 70%.

Government bonds firmed, and the yield on the benchmark paper due in 2030 dropped 10.5 basis points to 9.16%.

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