JOHANNESBURG (Reuters) -The South African rand held on to gains against the dollar on Wednesday after U.S. inflation data reinforced expectations that the Federal Reserve will opt for a smaller 25 basis point rate cut at its policy meeting next week.
At 1545 GMT, the rand traded at 17.91 against the dollar, about 0.2% firmer than Tuesday’s closing level.
The U.S. consumer price index grew 2.5% year-on-year in August, the smallest year-on-year rise since February 2021, but core inflation picked up, reducing the likelihood of a 50 basis point rate cut.
“Despite the fact that it is widely anticipated that the Federal Reserve will reduce interest rates next week, the magnitude of the rate cut is still uncertain,” said Wichard Cilliers, head of market risk at TreasuryONE.
In the absence of major local economic data releases on Wednesday, the rand has been moving on global factors.
On Thursday, July mining figures will be published. Economists polled by Reuters predict the sector will show year-on-year growth after declining in June, reflecting volatile conditions in Africa’s most industrialised economy.
On the Johannesburg Stock Exchange, the Top-40 index closed more than 1% lower. The benchmark 2030 government bond was little changed.
(Reporting by Alexander Winning and Tannur Anders; editing by Philippa Fletcher)
