Eskom, SAA add to rand's 1.3% slump

The rand slumped more than 1.3% on Monday, as uncertainty over trade tensions intensified following US President Donald Trump's latest attack on China, and as Eskom announced a dire set of results.

By 18:02 the local unit was trading 0.85% weaker at R13.52 to the US dollar after reaching an intra-day low of R13.57 to the greenback.

Jameel Ahmad, FXTM Global Head of Currency Strategy and Market Research, said the G20 meeting of finance ministers and central bankers in Argentina over the weekend highlighted the risks of trade tensions on the global economy, which could prevent the rand from further gains.

"There is still an air of uncertainty in the atmosphere over trade tensions, especially following Trump’s comments late last week that he could impose further tariffs on China and the social media tweet early this morning directed at Iran, it is likely to equal further pressure on global markets.

"This could encourage more 'risk off' from investors, meaning there is a likelihood that the South African rand could find itself under pressure due to a lack of investor demand," Ahmad said.

TreasyONE's Wichard Cilliers ascribed about a third of the rand's weakness to the state of affairs at power utility Eskom and national carrier SAA.

"About a 33% of the move is because of Eskom and SAA. The rest is emerging market risk-off," said Cilliers.

Eskom on Monday posted a R2.3bn loss for the year to end-March 2018, and said irregular expenditure ballooned to R19.6bn.

Cilliers said the dollar was on the front foot against major currencies, and especially other emerging market currencies.

"This all related back to the tariff war between the US and China. China devalued the yuan again to counter the possible tariffs," he said.

The rand was trading at R13.53/$ at local markets close.

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