February 12, 2019 / 7:24 AM / 6 months ago

South Africa's rand pauses plunge after Eskom fallout

A street money changer counts South African Rands in Harare, Zimbabwe, May 5, 2016. REUTERS/Philimon Bulawayo

JOHANNESBURG (Reuters) - South Africa’s rand steadied early on Tuesday following a sharp selloff in the previous session triggered by a sudden escalation of countrywide power outages.

At 0645 GMT, the rand was 0.16 percent firmer at 13.7825 per dollar, compared to its overnight close of 13.8050 in New York.

On Monday, the currency tumbled nearly 2.5 percent to its weakest in nearly three weeks as ailing power firm Eskom cut 4,000 megawatts from the national grid after seven generating units unexpectedly went offline.

Already pressured by a resurgent dollar, the power outages sent the rand through crucial technical levels at 13.70 and then 13.80, opening the path to further falls.

“The rand is now trading firmly on the back foot due to the aforementioned factors, the most telling of which is Eskom, weighing on the economic outlook and any prospects of growth in S.A.,” said analysts at Nedbank in a note.

Eskom, which supplies more than 90 percent of the power in Africa’s most industrialised economy, is drowning in a 419 billion rand ($30 billion) debt and has seen its power plants deteriorate sharply due to years of mismanagement.

The national statistics agency is due to publish unemployment and manufacturing data later in the session, with any signs of further slowing of the economy set to add to the rand’s woes.

Bonds were also weaker, with the yield on the benchmark government 10-year bond adding 2.5 basis points to 8.805 percent.

Stocks opened higher, with the Johannesburg Stock Exchange’s (JSE) Top-40 index rising 0.6 percent to 47,574 points.

Reporting by Mfuneko Toyana; Editing by Shreejay Sinha

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