South African Rand coins are seen in this illustration picture taken October 28, 2020.
Image: REUTERS/Mike Hutchings/Illustration/File Photo
The South African rand strengthened on Monday to its highest levels in five weeks, after state utility Eskom said it was optimistic about the power outlook over the southern hemisphere winter, aiming for no electricity cuts in the next four months.
Africa's most industrialised nation has experienced recurring power cuts for more than a decade that have constrained economic growth.
Despite Eskom's efforts to significantly reduce outages from the record levels seen in 2023, investor confidence remains shaky due to 14 days of power cuts in January-April
this year which Chief Executive Dan Marokane described as a temporary setback. At 1110 GMT, the rand traded at 18.2850 against the dollar , roughly 0.7% stronger than Friday's close.
The greenback last traded slightly weaker against a basket of currencies as investors awaited further details on U.S.-China trade relations, and the Federal Reserve's policy meeting later this week.
Citigroup said it expected South Africa's rand to strengthen versus the U.S. dollar, arguing that the real-rate premium in the continent's most industrialised economy and firmer commodity exports will outweigh domestic political jitters.
In a note to clients, strategists Bhumika Gupta and Luis Costa said they expect the rand to strengthen to below 18 per dollar.
In contrast, Societe Generale strategists said in a report that domestic and geopolitical uncertainties remain for South Africa, and therefore they expect the rand to reach 20 rand to the dollar by end June.
Attention will then shift to the release of the S&P Global Purchasing Managers’ Index (PMI) on Tuesday, followed by manufacturing and foreign reserves data due on Thursday.
South Africa's benchmark 2030 government bond was weaker in early deals, with the yield up 2 basis points to 8.845%.
REUTERS