Rand sheds 7% in a week due to floods, power cuts

The rand continued its losing streak and dropped heavily once again on Friday to end the week down 7% against the dollar as severe power cuts and floods dented the country’s economic growth prospects.

Also weighing on the rand, US Federal Reserve Chair Jerome Powell said on Thursday that a half-point interest rate hike would be on the table next month, boosting the dollar and hurting emerging-market currencies.

At 1530 GMT, the rand was trading at R15.62 against the dollar, around 1.64% weaker than its previous close and down 7% on its closing level last week.

The local currency, which had gained substantial strength in past few weeks on the back of strong commodity prices, has now become the worst performing emerging market currency from being the best just a few weeks back, said Andre Cilliers, currency strategist at TreasuryONE in a note.

However, he added that the fall was getting quite stretched and there could be a correction coming soon.

The crisis at state power utility Eskom and floods in KwaZulu-Natal province that caused at least R10 billion of infrastructure damage have reminded investors that Africa’s most industrialised economy faces significant constraints.

Although, later in the day Eskom announced withdrawal of power cuts but its commentary on the future of the supply for the June and July winter months earlier this week has not been very encouraging.

The South African government’s benchmark 2030 bond slightly strengthened with the yield falling one basis point to 9.855%.

Shares on the Johannesburg Stock Exchange (JSE) also slumped, in line with most major global markets as the Fed’s hawkish comments took steam out of equities trading.

The benchmark all-share index dropped by 1.48% to 72,265 points and the blue-chip index of top 40 companies ended down 1.55% at 65,385 points.