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Weak local fundamentals keep the rand on the ropes

Local news flow may have weighed on the rand – RMB analyst.

JOHANNESBURG – South Africa’s rand stayed on the back foot against the dollar on Friday, weighed down by a raft of negative domestic news, including power utility Eskom’s continued struggles to meet electricity demand.

By 10:18 the rand was at 12.3260 to the greenback.

It was within easy reach of 13-year lows reached earlier this week as investors dumped high-yielding but riskier emerging market assets in expectation of U.S. interest rates rising soon.

Local government bonds also eased, with the yield for paper maturing in 2026, the benchmark, edging up 1 basis point to 7.885%.

The rand failed to benefit from modest dollar losses against major currencies after investors booked profits in an extended rally that has driven the greenback to successive multi-year peaks this week.

“Local news flow may have weighed on the rand,” Rand Merchant Bank analyst Carmen Nel said, citing the suspension of Eskom’s chief executive while an inquiry is held into the operations of the troubled utility.

The currency of Africa’s most advanced economy, whose markets are highly liquid, also tends to take the brunt of investors’ exit from emerging markets because of longstanding budget and current account deficits.

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