JOHANNESBURG (Reuters) -The South African rand firmed on Friday against a weaker dollar, as markets weighed up bets on the size of a rate cut expected in the world’s biggest economy next week.
At 1539 GMT, the rand traded at 17.7275 against the dollar, about 0.2% firmer than its Thursday closing level.
The dollar last traded softer against a basket of peers, as investors remained on tenterhooks ahead of next week’s Federal Reserve meeting.
“The spotlight is now on the Fed’s policy update next week, which will reveal just how concerned policy makers are over the U.S. economy’s outlook,” said Danny Greeff, co-head of Africa at ETM Analytics.
While markets are certain the Fed will cut rates, uncertainty around whether it will go with a 25-basis-point or 50-basis-point cut remains.
“I fear there is a risk of some short-term volatility (for the rand) given how aggressive the market’s positioning is for rate cuts in the coming months,” Greeff added, referring to rate cuts in developed economies.
Like other risk-sensitive currencies, the rand often takes direction from global drivers such as U.S. monetary policy in addition to local data points.
Next week, local investors will focus on August consumer inflation figures on Sept. 18 and the South African Reserve Bank’s (SARB) interest rate announcement on Sept. 19. Economists polled by Reuters predict the SARB will announce a 25 basis point rate cut.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index closed about 0.4% up.
South Africa’s benchmark 2030 government bond also firmed, as the yield slipped 8.5 basis points to 8.915%.
(Reporting by Tannur Anders; Editing by Mrigank Dhaniwala and Timothy Heritage)
