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South Africa’s rand backtracks as relief rally pauses

PUBLISHED: Thu, 13 Aug 2020 11:26:12 GMT

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JOHANNESBURG (Reuters) – South Africa’s rand weakened slightly early on Thursday, pausing an advance in the previous session that saw the currency trade at its firmest in three days, with investors cautiously watching developments in the global economy.

At 0600 GMT the rand was 0.07% weaker at 17.4800 per dollar, having rallied to 17.3500 on Wednesday as souring diplomatic relations between the United States and China felled the greenback.

Recent tensions between Washington and Beijing over U.S. allegations of spying against the Asian superpower have overshadowed local issues, driving demand into riskier assets as investors searched for short-term returns.

With lending rates still relatively high in South Africa, despite deep cuts by the central bank, the rand and local bonds have seen inflows from investors ditching safe-havens but analysts have said these may offer only short-term relief.

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“The rand posted meaningful short-term gains yesterday as apparent stop-losses were triggered below 17.5000, and this provided the catalyst for some exporter activity that saw the local unit reach the mid-17.30s,” analysts at Nedbank wrote.

“However, it has not been able to sustain these gains; it currently holds at sub-17.5000. Local markets are likely to be cautious, as Eskom has announced the resumption of stage 2 load-shedding.”

State power firm Eskom said breakdowns of some its generating units had forced it to resume countrywide blackouts, or loadshedding, with “stage 2” seeing it slash up to 2,000MW from the national grid.