ZAR: Rand Cuts Earlier Losses Registered On Eskom's Blackout Warning

The rand has now clawed back the bulk of losses registered on the back of renewed concerns about energy supply, inspired by Eskom's issuance of an alert of high risk of loadshedding this coming weekend. USD/ZAR has pulled back from highs even as the BBDXY (+0.3%) is creeping higher. When this is being typed, the pair deals at 18.6355, over 400 pips above neutral levels. Familiar technical levels remain in play.

• Eskom said that there was a risk of having to implement loadshedding up to Stage 4 this weekend, after it experienced several breakdowns and used all of its emergency reserves. This would end a streak of more than 10 months of uninterrupted power supply, which had helped in the recovery of domestic economic sentiment.
• This comes after South Africa's energy regulator rejected Eskom's demand for a series of 36%/12%/9% tariff hikes in 2025-26/2026-27/2027-28 respectively and approved more moderate increases to the tune of 13%/5%/6%. Our EM credit team wrote that the decision will limit Eskom's profitability and ability to improve its credit profile near term.
• SAGBs have also taken a hit from Eskom's announcement this morning, with yields rising to fresh highs across the curve. South Africa's 5-year breakeven inflation rate now sits at 4.32%, with the 10-year rate last seen at 5.47%.
• As a reminder, the local central bank trimmed the key interest rate by 25bp, as expected by almost all analysts. However, two dissenters voted for a hold, while Governor Kganyago pointed to the abundance of risks and uncertainties ahead.
• The release of US PCE data later today and the lingering threat of an escalation in global trade tensions (flagged as a key risk by the SARB yesterday) may be adding to the rand's vulnerability. In a post on his social media platform Truth Social, US President Trump reiterated his threat to to punish BRICS nations should they try to undermine the global role of the USD.
• Note that Electricity Minister Kgosientsho Ramokgopa will address the media to provide a more detailed update on the electricity supply situation at 12:30GMT/14:30SAST.