JOHANNESBURG (Reuters) -The South African rand slumped on Wednesday against a strong dollar on bets that the Federal Reserve won’t rush to cut interest rates and as investors were uncertain about the outcome of next month’s U.S. election.
At 1515 GMT, the rand traded at 17.8450 against the U.S. currency, down about 1.8% on Tuesday’s closing level.
The dollar last traded about 0.3% firmer against a basket of currencies.
“For the most part, the rand’s weakness today has coincided with the dollar’s intraday appreciation… (It) appears that it is playing catch-up to the broader dollar advance in recent sessions,” said Danny Greeff, co-head of Africa at ETM Analytics.
Greeff added that uncertainty around the U.S. election on Nov. 5 and markets adjusting for a shallower Fed rate-cut cycle were the main market movers.
The risk-sensitive rand is highly sensitive to shifts in the outlook for U.S. monetary policy.
On the domestic front, data showed South Africa’s inflation dropped sharply in September, hitting its lowest level in more than three years and bolstering expectations for another local rate cut next month.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index closed down about 0.3%.
South Africa’s benchmark 2030 government bond also dropped sharply, with the yield rising 18 basis points to 9.505%.
(Reporting by Tannur Anders; Editing by Alexander Winning and Aurora Ellis)
