Rand firmer, stocks drop more than 2% as power cuts disrupt

The rand firmed on Thursday, joining fellow emerging market currencies in an advance against a weaker dollar that shielded it from domestic economic issues.

At 1500 GMT the rand was 0.58% firmer at R16.71 per dollar compared to an overnight close of R16.81.

The rand has struggled for momentum in recent sessions, despite global demand for risk currencies, which have been spurred by dimming hopes of a quick US economic recovery and jitters heading into US elections in November.

While the dollar paused its slide to a 28-month low earlier this week, high-yielding units like the rand drew buyers hungry for returns. Concerns about local politics and evidence the local economy is still weak, however, have kept rand bets cautious.

Data on Thursday showed the number of new US claims for unemployment benefits fell, but not enough to signal strong economic recovery.

Locally, South African private sector activity contracted for the 16th straight month in August, albeit at a slower rate, as Covid-19 lockdown restrictions continued to depress demand and sentiment.

A third day of nationwide power cuts by state utility Eskom also restrained demand for the rand.

Bonds firmed, with the yield on the benchmark 2030 government issue down 2 basis points to 9.115%.

In the equity market, Eskom’s accelerated power cuts drove stocks lower. Mining and retail firms often cite power cuts as a risk to trading.

Furniture retailer Lewis Group led the decliners, sinking 7.67%. Gold miners also fell due to weaker bullion prices. The gold index closed 0.49% lower.

The Johannesburg all-share index fell 2.4% to 54,522 points while the Top 40 index declined 2.63%.

Source: moneyweb.co.za