JOHANNESBURG: South Africa's rand retreated against the dollar on Thursday, falling as much as 1 percent after power utility Eskom said the national grid would likely stay under pressure for up to three years, pointing to continued depressed economic growth.
Government bonds halted a recent strong rally that had taken yields to 19-month lows, a move analysts said had been overdone.
The rand plumbed a session low of 11.5600 to the dollar after Eskom said rolling electricity blackouts -- a deterrent to investment in Africa's most advanced economy -- would be inevitable for the next three years or so.
A Reuters poll shows economists have lowered economic growth predictions for this year to 2.3 percent from 2.5 percent predicted one month ago, largely due to the blackout risk.
By 1645 GMT the local unit was at 11.5300/dollar, down 0.8 percent from where it ended Wednesday's session in New York. In fixed income, the heavily traded bond due in 2026 was yielding 7.48 percent, unchanged from the previous close.
Government bonds have taken their cue from strong demand in short-term forward rate agreements since the start of the year as investors speculate that a slide in oil prices could open the door for interest rate cuts this year.
"The possibility exists that the curve will start to price in the risk of a rate cut should oil prices remain subdued and inflation shows signs of heading below 4 percent," Tradition Analytics said, adding however: "Technically, recent moves look a touch overdone."
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