Rand jumps ahead of Fed rate decision

The rand jumped against the dollar on Wednesday, ahead of the US Federal Reserve’s interest rate decision.

At 1405 GMT, the rand traded at 18.25 against the dollar, about 2.08% stronger than its previous close.

The dollar was last down 0.48% at 102.8.

“The market is holding its breath for the FOMC decision,” said Greg Davies, head of wealth at asset manager Cratos Capital.

Slowing US inflation solidified bets that the Fed would skip a rate hike, but uncertainty remained about further rate increases.

The US central bank’s Federal Open Market Committee (FOMC) will announce its decision at 1800 GMT.

“Yesterday saw a moderation in US consumer inflation figures… with markets seeing the outcome supportive of a June US rate hike pause, which supported the rand,” said Investec chief economist Annabel Bishop in a research note.

Like most emerging market currencies, the risk-sensitive rand is highly susceptible to moves in global drivers such as the US monetary policy and the dollar.

Locally, South Africa’s retail sales fell 1.6% in April from a year earlier, according to government statistics released on Wednesday.

Shares on the Johannesburg Stock Exchange were little changed with the blue-chip Top 40 hovering around its previous close.

South Africa’s benchmark 2030 government bond was flat, with the yield at 10.715%.