Continued power cuts weaken South African rand

Traffic lights were not working in Cape Town, 21 January 2008, as a result, of power cuts, or “load shedding”, as it is called, by the national electicity supplier, ESKOM. ESKOM has come under harsh criticism, for failing to plan for the country’s growth in demand for electicity, that has accompanied the country’s economic growth. These breaks in power supply have happened all over the country, and according to the newspaper poster, all over the African continent. AFP PHOTO / RODGER BOSCH (Photo by RODGER BOSCH / AFP)

Ahead of impending local and international economic data, South Africa’s rand weakened slightly early on Monday as rolling power cuts from the state-owned power utility weighed on market sentiment.At 0628 GMT, the rand traded at 14.4375 versus the dollar, 0.33 percent weaker than its New York close on Friday.

Following a step up in rolling blackouts on Saturday, South Africa’s Eskom announced more planned power cuts for Monday and Tuesday underscoring the risks to businesses and curtailing more decisive rand recovery as the supply-side constraint continues to dampen the outlook for the domestic economy and feeds into deteriorating business Confidence.

The currency will await further direction from local inflation data and the U.S. Federal Reserve’s Reserve interest rate decision due later this week.Government bonds weakened, with the yield on the benchmark instrument maturing in 2026 up 5 basis points to 8.720 percent. 

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