JOHANNESBURG (Reuters) -South Africa’s rand firmed on Tuesday, as a pullback in the U.S. dollar offered support despite continued power cuts that cloud the domestic economic growth outlook.
At 1501 GMT, the rand traded at 15.9450 against the dollar, 1.28% firmer than its previous close.
The dollar fought for a footing after falling from near 20-year highs on Monday, as investors trimmed bets on whether U.S. interest rate hikes will drive further dollar gains and investor appetite for riskier assets increased. [USD/]
On Monday, the stronger dollar and a power crisis at home saw the rand hit its weakest level since November, 2021.
“Severe US interest rate hikes… will have a marked negative effect on growth both in the U.S. and globally, and so on the rand, which is already at very undervalued levels,” Investec economist Annabel Bishop said in a note.
She added that the rand is at risk of weakening further in the rest of this quarter and the third quarter of 2022, due to a traditionally greater aversion to risk among investors in the northern hemisphere summer.
State power utility Eskom implemented deeper controlled outages due to more breakdowns at its generating units, meaning a larger part of the country experienced rolling blackouts. It said power cuts would continue on Tuesday evening.
On the Johannesburg Stock Exchange (JSE), the All-Share index ended up 0.7% at 69,696 and the blue-chip index of top-40 companies closed up 0.85% at 63,027 points.
Although local economy linked stocks such as banks and financials slipped on the back of weak investor confidence, mining stocks jumped led by increase in platinum and coal prices, giving the market a boost.
Tech investor and biggest listed company on the JSE, Naspers, was up 6.7% and its subsidiary Prosus was up 5.8%.
Government bonds firmed alongside the currency, with the yield on the benchmark 2030 maturity down 3 basis points to 9.985%.
(Reporting by Olivia Kumwenda-Mtambo, Rachel Savage and Bhargav Acharya; Editing by Sherry Jacob-Phillips and Ed Osmond)
