The rand weakened to the lowest in a month against the dollar on Tuesday at midday, as global growth amid the ongoing war in Ukraine and load-shedding weighed on the currency.
The local currency fell about 1.5% against the dollar in intraday trading — the most since late February — as Russia’s move into eastern Ukraine raised market jitters. Ukrainian President Volodymyr Zelensky said Russian forces had begun a new campaign to conquer the Donbas region in the east of his country.
“We return from the long weekend to a strong dollar that is driven by soaring US bond yields and a renewed offensive by Russia into Ukraine,” said TreasuryOne currency strategist Andre Cilliers.
On Monday, the World Bank lowered its estimate for global growth in 2022 to 3.2% from a January prediction of 4.1%, amid pressure on the outlook for Europe and central Asia that includes Russia and Ukraine, and general uncertainty.
World Bank chief economist Carmen Reinhart said the global economy was passing through a period of “exceptional uncertainty” and added that she would not rule out further downgrades to the growth outlook, Bloomberg reported.
Locally, power utility Eskom announced a move to stage 4 load-shedding ending on Friday, while concerns over devastating floods in KwaZulu-Natal — which killed more than 400 people and caused damage valued at billions of rand — also weighed on sentiment.
Stage 4 load-shedding comes after Eskom recorded a high number of “unplanned breakdowns”, which prompted the abrupt start of stage 2 load-shedding on Easter Sunday afternoon as Eskom was unable to keep the lights on.
The situation escalated suddenly on Tuesday when units at Majuba and Tutuka tripped, forcing the implementation of stage 4 load-shedding.
“In addition to concerns over weak global growth outlook, the rand weakened as Eskom warned of more power cuts this week,” said Citadel Global director Bianca Botes. “Continued black- outs and ravage to critical infrastructure in KwaZulu-Natal by heavy rainfall and flooding are having a negative effect on the country.”
At 1.30pm, the rand had weakened 1.29% to R14.8485/$, 1.41% to R16.0244/€ and 1.39% to R19.3208/£. The euro was 0.1% firmer at $1.0792.
“The rand remains susceptible to international movements, but should gain some support from higher commodity prices and resource-driven dollar inflows,” said Cilliers.
The yield on the R2030 rose six basis points to 9.84% in afternoon trade. Bond yields move inversely to prices.
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