Load-shedding casts shadow over rand’s outlook

The rand was slightly firmer on Wednesday morning as risk assets found support from comments by US President Donald Trump that a March 1 deadline for new tariffs on China is not set in stone.

US markets pushed higher based on this on Tuesday, with Asian markets and emerging-market currencies also benefiting on Wednesday morning.

At 9:30am the rand was 0.2% stronger at R13.7417/$, 0.22% firmer at R15.5636/€, while remaining flat at R17.7481/£. The euro was little changed at $1.1326.

Unlike its peers, however, the rand was not revelling in renewed risk appetite, weighed down by domestic constraints, said Rand Merchant Bank analyst Nema Ramkhelawan-Bhana.

Rolling electricity blackouts and less than favourable economic data have left investors uneasy about the prospects for the local currency, she said, with three-month rand-dollar implied volatility above its 50-week moving average.

Implied volatility is a measure of sentiment towards a currency, measuring the range in which traders expect it to move over a certain period.

Locally, load-shedding continues on Wednesday, while SA’s largest labour federation, Cosatu, has embarked on a one-day strike in protest against job losses.

This comes as the government seeks to deal with Eskom’s debt mountain, but ratings agency Moody’s warned on Monday that plans to unbundle the entity could be derailed by vested interests.