Rand Extends Year’s Worst Slide as Eskom Blackout Concern Rises
The rand declined, extending the worst slide among emerging-market currencies this year, on concern forced power blackouts by Eskom Holdings SOC Ltd. may hamper output in Africa’s biggest economy.
South Africa’s currency slipped 0.8 percent to 9.2490 per dollar by 4:24 p.m. in Johannesburg, bringing its fall this year to 8.5 percent, according to data compiled by Bloomberg. Yields on the benchmark 10.5 percent bonds due December 2026 rose 4 basis points, or 0.04 percentage point, to 7.44 percent.
Eskom, the state-owned electricity company, is “very concerned” about coal supplies and its reserve power margin, the Johannesburg-based Beeld newspaper reported, citing spokeswoman Hilary Joffe. South Africa’s central bank will probably leave its benchmark repo rate unchanged tomorrow, according to all 19 economists in a Bloomberg survey, while concern that Europe’s debt crisis will persist damped demand for assets seen by investors as riskier.
“Our bigger worry remains that there will be renewed blackouts,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “Eskom is running with tight capacity.”
The rand depreciated 15 percent against the dollar in the first quarter of 2008, when coal shortages and maintenance at power plants forced Eskom to cut electricity to the nation’s mines.
The risk of rolling blackouts this quarter and next year is “very high” after strikes at mines owned by Exxaro Resources Ltd. (EXX), the nation’s second-biggest coal producer, cut supplies to plants, Peter Attard Montalto, a London-based analyst at Nomura International Inc., said in a note yesterday. That may drive the rand as low as 9.95 per dollar, he said.
Most emerging-market stocks fell and commodity prices declined amid concern Cyprus won’t meet the conditions for an international bailout of its banks. Cyprus’s parliament probably won’t pass the law taxing deposits, Reuters reported, citing government spokesman Christos Stylianides.
“The focus is still on Cyprus, and we’ve seen a bit of a selloff of emerging-market assets, with the rand tracking that,” Duncan Howes, a currency trader at Absa Group Ltd. (ASA) in Johannesburg, said by phone. “Then there is the Monetary Policy Committee statement tomorrow. The market is probably lightening up before that.”
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