June 18th, 2008

KRW: Spot came off to 1019 but firm buying pushed back up to 1024 then 1029

- FX swaps higher across board after lower USD rates







South Africa

NERSA said tariff increases of 20-25% over next 3 years

Granted eskom 13.3% tariff rise for 08/09 so avg 27.5% total increase for period

Can increase prices 20-25% each year



USDZAR coming off high of 8.0775 back towards 8.0500 level. Market collapsed overnight to 7.9650 low on s/l selling and anticipation of positive news, however was bid back up first on weak retail sales number and then a somewhat tame Eskom tariff decision that didnt cause a major reaction but reminded market of tenuous domestic situation.



Eskom was gratned a one-off tariff increase of 13.3%, coupled with a 14.2% increase from December '07, making a 27.5% hike for '08. They were also granted ability to increase tariffs over next 3 years b/w 20-25% . Decision by NERSA was fairly prudent in balancing Eskom's needs while spreading out implementation over time and not a major shock to market in either direction, bringing focus back to domestic economic data



. Concerns remain though both in implementation and whether the increase will be enough to meet Eskom's financing needs and allow it to keep it's high debt rating from Moody's.