South Africa's rand tumbles to 12 year lows on domestic pressures

JOHANNESBURG: South Africa's rand collapsed on Wednesday to 12-year lows after long-standing economic frailties and more immediate socio political pressures turned sentiment against the unit.

By 1540 GMT the rand led a broad emerging market meltdown against the dollar, shedding 1.8 percent to 11.8925 per dollar , its weakest level against the greenback since March 2002 according to Thomson Reuters data.

The rand initially skidded to a six-and-a-half year low of 11.8200 after power-supplier Eskom announced a 10th straight day of electricity outages, but then the currency kept falling.

The unit also fell sharply against other major currencies, shedding 1.5 percent against the euro and falling 1.7 percent versus the pound sterling.

Global risk sentiment was rattled on Wednesday, sending emerging currencies lower, as a meeting of euro zone finance ministers in Brussels showed little sign of reaching agreement on terms of Greece's bailout.

"EM currencies have been on the back foot given the really strong (US) payrolls print on Friday. This is reflected in the rand as it is for other emerging market currencies," Standard and Chartered' s head of research Razia Khan said.

Khan said the talks over Greece were also taking their toll.

However, it was domestic issues that offered the final push, urging investors to flee the rand in droves.

"There are many little issues contributing to the rand's weakness. And it is exposed to such a lot of exogenous issues, like the on-going European situation.

But foreign investors definitely dumped the currency today, probably taking up safe-haven options elsewhere," said Cheslyn Francis of Afrifocus Securities.

State-run Eskom admitted last month that South Africa's energy reserves were all but exhausted and that rolling blackouts over the next three years were inevitable.

Bonds were also weaker, with benchmark government issue due in 2026 ticking up 3.5 basis points to 7.62 percent.

Known for being more volatile than its emerging market peers due to the liquid nature of local markets, the rand is expected to remain under pressure as President Jacob Zuma gives his annual state of the nation address to parliament on Thursday.