JOHANNESBURG - The South African rand sank to a new three-year low on Thursday, as investors sold the currency on concerns about the country's economic outlook because of a long-running power crisis that could soon get worse.
Struggling power utility Eskom is implementing the worst power cuts on record lasting more than 10 hours a day for some households and businesses. Experts predict longer outages deeper into the southern hemisphere winter.
On Thursday, the rand broke through 19 to the U.S. dollar for the first time since April 27, 2020, when the country was in a harsh COVID-19 lockdown.
At 1045 GMT, it had recovered slightly to trade at 18.9825 to the dollar, down more than 0.6% on its Wednesday closing level and taking this week's losses to more than 3%.
The rand's slide reignites upside risks to the inflation outlook, bolstering the case for the central bank to hike interest rates again when its monetary policy committee meets later this month, Investec analysts said in a research note.
South African Reserve Bank (SARB) Deputy Governor Kuben Naidoo told an online webinar on Thursday that the bank did not target a specific exchange rate but it was an important signal about financial conditions in the economy.
"You don't want a too weak or too strong exchange rate and ultimately it's the job of the central bank to provide leadership in that context and to provide an anchor. An anchor in our context is inflation at 4.5% and so we would act if we think that inflation target is at risk," Naidoo said.
Rand Merchant Bank analysts said in a research note that negative sentiment was in the driving seat and the rand could fall further.
South African President Cyril Ramaphosa is expected to answer questions from lawmakers on his administration's efforts to ease the crippling power shortage from 1200 GMT.
(Additional reporting by Kopano Gumbi; Editing by Alexander Winning, Toby Chopra and Subhranshu Sahu)