Power woes weigh on rand as market awaits rate call

27 January 2015 - 11:32 By Reuters
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rands, money
rands, money
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The rand was in danger of losing ground against the dollar for the third consecutive day on Tuesday as South Africa's nagging electricity woes kept investor sentiment depressed.

Investors were also focused on Thursday's monetary policy statement for the central bank's latest inflation and gross domestic product projections, although the market has largely priced in a "steady" call on interest rates.

At 0648 GMT, the rand was trading at 11.4535 versus the dollar, not far off Monday's New York close at 11.4650.

The rand had fallen to 11.4930 in the previous session after state power utility Eskom, which has struggled to meet electricity demand since 2008, cut 2,000 megawatts of electricity from the grid on Monday to try and keep power demand from overwhelming capacity.

"The rand was a meaningful underperformer yesterday, losing ground while practically all risk currencies gained," RMB currency analyst John Cairns noted.

"Eskom can certainly be blamed for some of this but the relative move also fits into our picture of a rand whose outperformance last week is not justified and which will struggle to hold its gains."

The currency had rallied to 7 week highs last week after the European Central Bank said it buy 60 billion euro ($67.28 billion) worth of assets each month to try and stimulate growth in the euro zone.

The electricity supply problem is just one of a myriad of structural problems that have plagued Africa's most developed economy in recent years, limiting annual growth to around 2 percent since a recession in 2009.

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