SA rand back

SOUTH Africa’s rand is back on its perch as the world’s most volatile currency as investors price in the risk of a credit-rating downgrade while awaiting details of the government’s rescue plan for the state-owned electricity company.

The currency fell for a second day against the dollar on Thursday to levels last seen in early January, and bond yields rose to their highest this year. The rand’s three-month implied volatility climbed for a ninth day, overtaking the Turkish lira, as traders anticipate wider price swings.

Eskom Holdings SOC Ltd. cut electricity supplies for a fifth day on Thursday, and warned its power generation system remains “vulnerable.” President Cyril Ramaphosa said his government will outline plans to address challenges at Eskom on Thursday. The blackouts are “having a devastating impact on our economy and on the ordinary lives of people,” the president said in comments broadcast on eNCA. Moody’s has flagged the utility’s woes as credit-negative.

“We think there is more scope for a higher risk premium to be priced in the currency,” said Kiran Kowshik, a London-based emerging-market currency strategist at UniCredit Bank AG. “An increased risk of a rating downgrade should place the currency under pressure given that there is a very large foreign investors’ exposure in the local bond market.”

The rand has toppled the lira to claim the title of most volatile in EM Unicredit recommends buying dollar-rand via two-month forwards, targeting a move to 14,75 rand per dollar, with a stop placed below 13,50.

The rand weakened 0,7 percent to 14.1561 per dollar by 11:43 a.m. in Johannesburg, adding to Wednesday’s 2,2 percent slump. Yields on rand-bonds due December 2026 climbed three basis points to 8,94 percent, the highest on a closing basis since 27 December.