JOHANNESBURG, Sept 18 (Askume) – The rand strengthened on Wednesday ahead of a Federal Reserve interest rate cut and South African inflation data.
At 0702 GMT, the rand was trading at 17.5625 against the dollar, up about 0.2% from its previous close.
The market is confident that the Federal Reserve will announce a rate cut on Wednesday and the world’s largest economy may cut interest rates by 50 basis points.
“The risk to the market is that the Fed will cut interest rates by 25 basis points and then risk the cat,” ETM Analytics said in a research note.
“A conservative 25 basis point rate cut would reverse the trend in pricing cuts, easing some trading conditions and potentially triggering a sell-off in the rand.”
Like other risk-sensitive currencies, in addition to domestic data, the rand is often influenced by global drivers such as US monetary policy.
Local investors will focus on August consumer inflation data (ZACPIY=ECI) on Wednesday . Analysts polled by Askume last month had forecast annual inflation at 4.5%, up from 4.6% in July and at the midpoint of the central bank’s target range of 3% to 6%.
Falling inflation could support an interest rate cut when the South African Reserve Bank announces its policy decision on Thursday (ZAREPO=ECI) .Economists polled by Askume had expected a 25 basis point cut in the central bank’s key interest rate.
Statistics South Africa will also release July retail sales data (ZARET=ECI) on Wednesday .
South Africa’s 2030 benchmark government bonds were slightly firmer in early trade, with the yield falling 2 basis points to 8.835%.
