Rand finally finds some support – but isn’t out of the woods yet

The South African rand found some support in the markets on Thursday, recovering against the US dollar to trade consistently below the R19 mark for the first time in months.
In afternoon trade, the local unit was trading at around R18.90 to the dollar, supported by positive economic data and an extended reprieve from load shedding.
The rand was also supported by moves in foreign markets, with the dollar largely range-bound and investors generally looking to coming data points from the United States, including inflation numbers next week.
According to TreasuryOne, local markets are enjoying more positive sentiment, with the country posting positive growth in the first quarter – however marginal it may be.
Bloomberg analysts noted that a smaller than expected deficit in the country’s current account is also giving the rand a boost.
In addition to the economic data, the country is also pausing to catch its breath from almost nine months of near-permanent load shedding, with power utility Eskom announcing this week that it has enough capacity to suspend the rolling blackouts for at least 16 hours a day until further notice.
Over the past year and a half, the power utility has only been able to spare South Africans from outages for three full days.
While load shedding is still being implemented at stage 4 in the evenings, the 16-hour suspending between midnight and the evening peak is giving businesses and citizens a much-needed break.
Energy experts have attributed the break in load shedding to lower demand, improved energy availability due to cooler weather, as well as boosted capacity from burning through diesel at a much greater rate.
However, warnings persist that the situation can change at any given moment, and the risk of higher stages of load shedding returning is high.
The same can be said for the rand’s fortunes.
According to TreasuryOne, longer-term risks to the rand remain, and the risk premium associated with South Africa – given the energy crisis, geopolitical missteps and other crises – is still very much in play.
A Reuters poll on Thursday found that South Africa is unlikely to recover the full 10% loss it has made against the dollar, with economists predicting stabilisation at around R18.13/dollar in 12 months – approximately a 5% appreciation from current levels.
The rand, highly liquid and usually an investors’ favourite due to returns in high carry trades, is currently one of the worst five among 20 emerging market currencies tracked by Reuters since the year began.