JOHANNESBURG (Reuters) -South Africa’s rand extended the previous day’s losses on Thursday as the U.S. dollar hovered near a seven-week high on optimism over U.S. debt ceiling talks.
At 1529 GMT, the rand traded at 19.3625 against the dollar, almost 0.5% weaker than its previous close. On Wednesday, it fell around 1%.
The dollar was last trading up 0.61% at 103.52 against a basket of global currencies, after U.S. government leaders agreed to negotiate to avoid a damaging debt default.
The risk-sensitive rand often takes cues from global factors like U.S. economic policy in the absence of major local drivers.
It has been weighed down at home by South Africa’s power crisis, with state utility Eskom warning on Thursday that it may have to increase scheduled outages to an even higher level.
“The broad R19.00/R19.50 range remains intact for now, but (there) is a distinct feeling of unease over the rand,” said Andre Cilliers, currency strategist at TreasuryONE.
“The G7 meeting kicks off today with South Africa not being invited, load-shedding continues unabated, and there is some concern over the S&P’s credit rating review tomorrow,” he said.
Local investors will turn their focus towards an interest rate decision by the South African Reserve Bank (SARB) next week, with analysts expecting another hike.
“With the rand’s substantial weakness… the risk to the inflation outlook on balance is still on the upside, and the SARB is widely expected to hike at its meeting next week,” said Investec analyst Annabel Bishop in a research note.
Stock market ended lower, with both the Top-40 index and the broader all-share down over 0.9%.
South Africa’s benchmark 2030 government bond was weaker, with the yield up 11 basis points at 11.165%.
(Reporting by Tannur Anders, Nellie Peyton and Bhargav AcharyaEditing by Mark Potter and Shweta Agarwal)
