JOHANNESBURG (Reuters) -The rand slipped on Wednesday, extending losses from the previous session, as severe power cuts and floods highlighted economic constraints on South Africa.
At 1532 GMT, the rand traded at 15.0850 against the dollar, around 0.9% weaker than its previous close.
The rand weakened nearly 2% on Tuesday, when state power utility Eskom ramped up scheduled power cuts following trips at its faulty coal-fired power stations.
ETM Analytics said the “Stage 4” power outages were a big red flag to investors.
“The rand has been trading like a safe-haven currency in recent months. Its link to the commodity cycle was difficult to ignore, and investors traded it as a proxy for commodities,” ETM Analytics wrote in a research note.
“It traded like a currency that belonged to a stable country with relatively few problems, and South Africa is, of course, far from that.”
Consumer inflation rose to 5.9% year on year in March from 5.7% in February, data from Statistics South Africa showed on Wednesday.
Although the increase was slightly below a forecast of 6% by analysts polled by Reuters, inflation is testing the upper bound of the central bank’s target range of 3% to 6%.
Emerging market currencies were also pressured by a strengthening dollar.
South African stocks were down slightly, with the Johannesburg Stock Exchange’s Top-40 Index slipping 0.15% to 66,765 points and the broader All-Share Index losing 0.06% to 73,783 points.
Insurer Old Mutual dropped 1.95% after it announced a Black economic empowerment transaction that would likely hit profits.
Other companies that dragged the index downwards were those that tend to suffer when the rand is weak.
In fixed income, the benchmark 2030 bond strengthened slightly, with the yield down two basis points to 9.895%.
(Reporting by Alexander Winning, Rachel Savage and Emma Rumney; Editing by Sherry Jacob-Phillips and Angus MacSwan)
