South African rand drops as power cuts continue

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July 1 (Reuters) – South Africa’s rand weakened again on Friday, as the dollar rose, boosted by the pessimism about the outlook for the global economy.

At 1532 GMT, the rand traded at 16.4150 against the dollar, 0.89% lower than its previous close. The rand touched 16.4700 on Thursday, its lowest since October 2020.

The dollar index , which measures the greenback against six counterparts, was up around 0.6%, as investors turned towards the safe-haven currency amid economic uncertainty. read more

Investec analyst Annabel Bishop said in a research note that the rand will see further market weakness if power cuts persist in the second half of the year.

“South Africa sees economic growth at risk this year from the recent severe load shedding regime implemented at stage 6, even though it fluctuates to stage 4 intermittently,” Bishop said, adding that the outcome for 2022 GDP would depend on how long the country experiences severe outages.

State power utility Eskom extended power cuts on Thursday and Friday, citing a labour strike as the cause of the worst power cuts the country has seen in more than two years.

On the Johannesburg Stock Exchange, the Top-40 (.JTOPI) index closed down 0.78% while the broader all-share (.JALSH) dropped 0.85%.

New vehicle sales (ZAVEHY=ECI) rose 7.6% year-on-year in June, data showed on Friday, while separately the Absa Purchasing Managers’ Index (PMI) expanded at a slower pace due to waning domestic demand and activity during the month.

The government’s benchmark 2030 bond was higher, with the yield down 1.3 basis points to 10.425%.

Reporting by Bhargav Acharya in Bengaluru and Anait Miridzhanian in Gdansk; Editing by Toby Chopra and Alistair Bell