Illustration photo of South African rand

South Africa's rand stutters as electricity crisis weighs

JOHANNESBURG (Reuters) - South Africa's rand edged lower on Wednesday, lagging gains in its emerging market counterparts, as the prospect of rolling blackouts and bleak demand for local currency dented sentiment.

At 0630 GMT, the rand was 0.07 percent weaker at 14.5050 per dollar from a close of 14.4950 overnight in New York.

Caution prevailed among investors as South Africa's power utility Eskom said it would continue implementing power cuts on a rotational basis as it struggles with generating capacity shortages.

Analysts say power cuts, which have happened in several rounds since June last year, are one of the reasons why business confidence has slumped in recent months.

Most emerging market currencies advanced as investors expect the U.S. Federal Reserve to strike a dovish tone and maintain the interest rates at its policy meeting decision later in the day.

Those gains, however, were capped by renewed tension in U.S.-China trade negotiations overnight after reports that some U.S. officials were concerned China was pushing back against Washington's demands in trade talks.

The rand has stuttered all week and is unlikely to be buoyed by an expected tame inflation print due at 0800 GMT, with investors deterred by a deepening crisis at state firm Eskom, which said on Tuesday it will continue power cuts as it battles capacity shortages.

The situation worsened on Saturday after Eskom lost its electricity imports from the Cahora Bassa hydroelectric system in Mozambique, which contributes more than 1,000 MW to the South African grid, after a powerful cyclone.

Bonds weakened, with the yield on the benchmark government paper due in 2026 adding 6.5 basis points to 8.825 percent.

Stocks were set to open lower at 0700 GMT, with the JSE securities exchange's Top-40 futures index down 0.41 percent.

(Reporting by Mfuneko Toyana, Editing by Sherry Jacob-Phillips)

2019-03-20 09:25:32

© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.