South Africa's rand weakens as power cuts resume, Mideast tensions escalate January 06, 2020
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South Africa’s rand weakened on Monday as a resumption of power cuts spurred concerns over domestic growth outlook, while an exchange of threats between Iran and the United States sent investors scurrying for safe-haven assets.

Illustration photo shows a two-rand coin above a South African flag April 12, 2017. REUTERS/Thomas White

At 0625 GMT, the rand traded at 14.3500 per dollar, 0.35% weaker than its New York close on Friday.

South Africa’s struggling state utility Eskom late on Saturday resumed power cuts after a conveyor belt failure at its Medupi coal-fired power station.

Eskom said it did not plan to implement power cuts on Monday, but the possibility of electricity cuts remained as the power system was vulnerable.

The state-run electricity firm is battling to keep the lights on in Africa’s most industrialised economy because of repeated breakdowns at its fleet of coal-fired power stations.

Eskom’s fragility is one of the biggest challenges for President Cyril Ramaphosa, who is trying to revive growth in Africa’s most advanced economy.

Globally, investors fretted that the killing of Iran’s most prominent military commander by the United States could trigger a broader Middle East conflict.

U.S. President Donald Trump warned of a “major retaliation” if Iran hit back, while Iran’s replacement commander vowed to expel the United States from the region.

“Given the escalating tensions in the Middle East, we expect a stronger USD across the board. In thinner liquidity, the moves could be exacerbated in the short term, with any new headline prints or comments being the focal point,” Nedbank analysts said in a note.

In fixed income, the yield on the benchmark government bond due in 2026 was up 1 basis point at 8.27%.