The South African rand fell against the US dollar on Wednesday as traders awaited the release of the Federal Reserve’s meeting minutes for clues on the interest rate path of the world’s largest economy.
At 1501 GMT, the rand traded at 18.2475 against the dollar, about 1% weaker than its previous close. The local currency had hit 18.0300 on Tuesday, its strongest level since August.
The dollar last traded around 0.17% stronger against a basket of global currencies.
Investors are eagerly anticipating the publication of the Fed’s most recent meeting minutes on Wednesday[1]. “Markets will look for clues within the statement around the pace and timing of rate cuts in the world’s largest economy,” said Shaun Murison, senior market analyst at IG.
Like other emerging market currencies, the risk-sensitive rand often takes its cues from global drivers like U.S. monetary policy in addition to local data points.
Domestically, South Africa’s headline consumer inflation fell to 5.2% year-on-year in April from 5.3% in March, remaining within the South African Reserve Bank’s target range of 3%-6%, according to data from the statistics agency.
“The Reserve Bank governor has been quite vocal in suggesting that inflation needs to move back towards the 4.5% mark before rates might start to ease,” Murison said. “Of course the SARB will also look to the timing of large economies’ timing of rate cuts for guidance.
On the stock market, the Top-40 index closed down about 0.5%, while the broader all-share index ended the day down 0.4%.
South Africa’s benchmark 2030 government bond was slightly weaker, with the yield up 2 basis points to 10.290%.
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