The rand was flat against the dollar on Friday, struggling for direction after surprise gains in the face of a darkening growth outlook following a week of nationwide power cuts and ongoing uncertainty over US-China trade talks.
At 1530 GMT, the rand was 0.07% firmer at 14.47 per dollar, hardly budged from the morning’s open as investors awaited details of a cabinet decision on how to deal with a crisis at power utility Eskom.
South Africa’s government on Friday asked industry for the cheapest and quickest options to ease a power crunch, as cabinet held an emergency meeting to try to resolve a crisis threatening growth in Africa’s most industrialised economy.
Eskom, which cut power for a ninth straight day on Friday, is choking under a massive R450 billion debt burden and struggling to meet demand because its creaking coal-fired power stations haven’t been maintained properly.
The rand surprised market watchers by racing to a 5-month high in the session, hitting 14.37 before pulling back, in what some analysts said was a move backed by the high yield on offer, more so after local inflation fell again and the US Federal Reserve held rates.
“The rand rallied sharply overnight in response to a more confident tone on US-China trade negotiations and the UK elections which reduce uncertainty,” analysts at ETM said in a note.
“Domestically, it is likely that a return to an almost functioning power grid will support sentiment following the return to stage 1 load shedding last night.”
On the bourse, stocks soared alongside emerging market shares as reports of a Sino-US trade deal, as well as the prospect of a smooth Brexit, fired risk appetite across the globe.
The benchmark JSE Top-40 Index climbed 1.81% to 50 499.02 points while the broader All-Share Index rose 1.78% to 56,815.08 rand.
Financials were the biggest winners on the blue-chip index on the back of a firmer rand. Insurance and specialised finances company Discovery topped the bourse, up 6.13% at R122.
Banks followed, with Absa Group up 5.14% to R152.88, and Standard Bank Group rising 4.36% to R169.50.
Materials shares acted as a drag as gold prices fell and investors switched to riskier stocks. AngloGold Ashanti was down 5.37%, while Goldfields fell 3.27%.
In the fixed income market, the yield on the benchmark government bond due in 2026 was down 1.5 basis points to 8.32%.