JOHANNESBURG (Reuters) -The South African rand weakened alongside other emerging market currencies on Tuesday, with markets looking to Wednesday’s U.S. inflation print for clues about the Federal Reserve’s interest rate path.
At 1502 GMT, the rand traded at 17.92 against the dollar, down about 0.3% on Monday’s closing level.
“It has retreated in line with the rest of the emerging market currency basket, with the market generally just drifting at the start of the week ahead of tomorrow’s highly anticipated U.S. CPI (Consumer Price Index) data,” said Danny Greeff, co-head of Africa at ETM Analytics.
The inflation reading could affect whether the Federal Reserve delivers a regular 25 basis point (bps) rate cut or a 50 bps one at its Sept. 17-18 policy meeting.
Markets are currently fully pricing in a 25 bps cut from the Fed next week, with a 50 bps cut priced in at 30%, the CME FedWatch tool showed.
Greeff said healthy demand at the South African government’s weekly bond auction on Tuesday had done little to support the rand.
Neither did July manufacturing figures, which showed output rose 1.7% year on year after June’s 5.5% decline.
The Johannesburg Stock Exchange’s blue-chip Top-40 index closed 0.1% higher. South Africa’s benchmark 2030 government bond was little changed, with the yield at 9.015%.
(Reporting by Tannur Anders; Editing by Alexander Winning and Tasim Zahid)
