South Africa’s rand fell against the dollar in early trade on Wednesday as risk appetite waned on news of Iranian missile strikes on bases hosting US troops in Iraq, stoking fears of a broader conflict in the Middle East.
Power cuts in South Africa due to problems at state-run utility Eskom also weighed on the rand. The utility implemented rotational power cuts - locally known as “load shedding”- overnight until early morning on Wednesday because of a shortage of generating capacity.
At 0640 GMT, the rand traded at 14.3480 per dollar, 0.23 per cent weaker than its previous close.
“Markets were given a jolt by news of Iran firing rockets at U.S. bases in Iraq and we saw an immediate risk-off reaction,” said Andre Botha, senior dealer at TreasuryONE.
SEE ALSO: It’s time to sit back and relax after making Hamilton sweat
“We can expect ongoing volatility throughout the day as investors await further developments. Load shedding overnight is not helping rand sentiment at present.”
Struggling Eskom, which generates more than 90 per cent of South Africa’s power, is widely viewed as the biggest impediment to growth.
Saddled with unreliable coal-fired power stations, Eskom has struggled to meet demand since 2007, forcing it into several rounds of extensive power cuts. Outages last year dented economic output and shook investor confidence in President Cyril Ramaphosa’s administration.
In fixed income, the yield on the benchmark government bond due in 2026 was up 2.5 basis points to 8.29 per cent.