JOHANNESBURG – The rand took a battering on Wednesday before recovering some lost ground.
Earlier in the day, the unexpected decrease in consumer price inflation (CPI) to 4 percent compared with the expected 4.3 percent, from the previous 4.5 percent, did little to support the domestic currency as markets geared up for the Budget Speech later in the day.
Shortly after the CPI release, the rand was trading at R14.12 a dollar after losing 0.6 percent against the greenback.
Once the Budget Speech began, the bloodbath was in full swing. The rand immediately weakened by 1.8 percent following the announcement by Finance Minister Tito Mboweni that Eskom would receive financial assistance of R69bn over three years, subject to certain conditions.
The conditions of the financial assistance will be scrutinised by rating agency Moody’s, which warned of the potential implication a bailout could have on the local sovereign rating.
The rand pulled back from a low of R14.37 a dollar to recover to R14.19 as Finance Minister Mboweni progressed through the Budget Speech, placing particular emphasis on the fact that government would not take on Eskom’s debt.
At 5pm the rand was bid at R14.03 to the dollar, 11c firmer than Tuesday’s 5pm bid. Against the pound, the domestic currency was 7c firmer at R18.30 and versus the euro it was 9c stronger at R15.92.