Rand weakens as power cuts weigh

South Africa’s rand weakened against the dollar on Friday as power cuts weighed on the economy, while investors awaited a key interest rate decision from the central bank next week.

The rand was trading at 14.27 per dollar at 1444 GMT, 0.67% weaker than its previous close.

Many financial markets were rapidly reversing sharp falls seen at the start of the week following the killing of Iran’s top general in a US air strike, as fears of imminent conflict in the Middle East abated.

The rand also regained some ground, but it was held back by troubled state utility Eskom’s scheduled power cuts, which have dragged on efforts to revive growth in the continent’s most industrialised economy.

Weak domestic data throughout the week has also failed to provide a basis for optimism, NKC African Economics said in a note. “Recent manufacturing and upcoming mining data may be a precursor to a dismal Q4 GDP reading,” it said.

Investors were waiting for the outcome of the South African Reserve Bank’s monetary policy meeting next Thursday, when it will announce its interest rate decision after keeping rates on hold at 6.5% at its last meeting.

Read: Reserve Bank to keep repo rate at 6.5% on Jan 16 – poll

Kieran Siney from ETM Analytics said this would be the key event to watch in the coming week, predicting the central bank would remain cautious amid a “precarious” fiscal situation in South Africa.

“If the Sarb does indeed take a cautious stance and keeps rates on hold, we could see that provide the rand with some support next week,” he said.

Stocks, however, received a boost from the easing of concerns over US-Iran tensions eased. The Johannesburg Stock Exchange’s Top-40 index rose 0.65% to 51 245 points and the broader all-share index closed up 0.62% at 57 485 points.

Africa’s largest mobile operator by subscribers, MTN, was the biggest winner on the blue-chip index, rising over 5% after Nigeria withdrew a $2 billion tax demand in a closely watched case.

In fixed income, the yield on the benchmark government bond due in 2026 was down 2.5 to 8.215%.