Rand stays above R15/$ as Eskom generates uncertainty
Concern over Eskom’s debt has kept the rand under pressure, with the local currency largely shrugging off an emerging-market recovery
The rand remained under pressure on Thursday morning, failing to pull back under the R15/$ handle, as domestic uncertainty puts local risk assets on the back foot.
Concern that the government will ultimately be unable to generate a plan to shed Eskom’s debt load has meant that foreigners continue to sell SA bonds, while few analysts expect any significant strength in the local currency in coming months.
This is amplifying any risk-off moves on local markets, with most emerging-markets slightly firmer on Thursday and the global focus squarely on the Chinese yuan.
The yuan remains below seven to the dollar, having breached this level for the first time in 11 years earlier this week, although Chinese authorities subsequently fixed this while maintaining they were not using their currency as a trade war weapon.
Some consolidation in the rand is expected ahead of Friday’s Women’s Day public holiday.
At 9.38am the rand was flat at R15.0526/$ and R16.8813/€, while weakening 0.27% to R18.3296/£. The euro was 0.15% firmer at $1.1216.
The benchmark 10-year R186 government bond had weakened, with its yield falling one basis point to 8.35%. Bond yields move inversely to bond prices.
The recent stream of negative political and economic news has put an 80 basis points, or 0.8%, premium on SA’s 10-year bond, said Albert Botha, head of fixed income portfolio management at Ashburton Investments.
“The additional risk premium is now equal to what we saw in the days running up to the ANC elective conference in December 2017. Investors, and particularly foreign investors, are wary,” Botha said in a note.