(Reuters) -South Africa’s rand fell on Tuesday as the dollar was buoyed by stronger-than-expected U.S. inflation data, suggesting that the Federal Reserve may have to stay aggressive in raising interest rates.
U.S. consumer prices unexpectedly rose in August and underlying inflation picked up amid rising costs for rents and healthcare, according to readings reported by the U.S. Labor Department.
Fed officials will meet next week to deliver the interest rate decision, with traders betting on a third straight rate hike of 75 basis points.
“With FOMC members, particularly Jerome Powell, communicating increasingly in favour of a 75bp increase in U.S. interest rates, South Africa is now seeing a significant probability of one too next week,” Investec analyst Annabel Bishop said in a research note.
Like most emerging market currencies, the rand is highly susceptible to global drivers like the U.S. monetary policy.
At 1541 GMT, the rand traded at 17.3900 per dollar, 1.55% weaker than its previous close.
The dollar index, which measures the currency against six rivals, was up 1.22% at 109.540. [nL1N30K18Y]
On the local economic data front, figures from Statistics South Africa showed that the country’s total mining output in July dropped 8.4% year on year.
Shares on the Johannesburg Stock Exchange fell, mirroring the slump in global equities following the U.S. inflation data.
Overall on the stock market, the Top-40 ended 2.23% lower while the broader all-share dipped 2.15%.
The government’s benchmark 2030 bond was little changed, with the yield up 1 basis point at 10.195%.
(Reporting by Anait Miridzhanian in Johannesburg and Bhargav Acharya in Bengaluru; Editing by Bradley Perrett and Mark Porter)
