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Rand strengthens amid Eskom's optimistic power outlook

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Citigroup ( C/PN ) forecasts rand strengthening below 18 rand per

dollar

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Focus shifts to S&P Global PMI release on Tuesday

By Sfundo Parakozov, Colleen Goko

JOHANNESBURG, May 5 (Reuters) - The South African rand

strengthened on Monday to its highest levels in five weeks,

after state utility Eskom said it was optimistic about the power

outlook over the southern hemisphere winter, aiming for no

electricity cuts in the next four months.

Africa's most industrialised nation has experienced

recurring power cuts for more than a decade that have

constrained economic growth.

Despite Eskom's efforts to significantly reduce outages from

the record levels seen in 2023, investor confidence remains

shaky due to 14 days of power cuts in

January-April

this year which Chief Executive Dan Marokane described as a

temporary setback.

At 1110 GMT, the rand traded at 18.2850 against the dollar

, roughly 0.7% stronger than Friday's close.

The greenback last traded slightly weaker against a

basket of currencies as investors awaited further details on

U.S.-China trade relations, and the Federal Reserve's policy

meeting later this week.

Citigroup ( C/PN ) said it expected South Africa's rand to

strengthen versus the U.S. dollar, arguing that the real-rate

premium in the continent's most industrialised economy and

firmer commodity exports will outweigh domestic political

jitters.

In a note to clients, strategists Bhumika Gupta and Luis

Costa said they expect the rand to strengthen to below 18 per

dollar.

In contrast, Societe Generale strategists said in a report

that domestic and geopolitical uncertainties remain for South

Africa, and therefore they expect the rand to reach 20 rand to

the dollar by end June.

Attention will then shift to the release of the S&P Global

Purchasing Managers' Index (PMI) on Tuesday,

followed by manufacturing and foreign reserves

data due on Thursday.

South Africa's benchmark 2030 government bond was

weaker in early deals, with the yield up 2 basis points to

8.845%.