JOHANNESBURG (Reuters) -South Africa’s rand strengthened on Wednesday after a domestic inflation reading was better than expected and U.S. price data reinforced bets that the U.S. Federal Reserve will cut interest rates next week.
At 1525 GMT, the rand traded at 17.74 against the U.S. dollar, about 0.4% stronger than its previous close.
South Africa’s inflation rate was at 2.9% year on year in November from 2.8% in October, staying just below the central bank’s target range after food inflation slowed to its lowest level in almost 14 years.
Economists polled by Reuters had expected inflation of 3.1% in annual terms.
“Looking ahead, we expect inflation will continue to edge higher over the coming months. But it is likely to remain contained and stay below the 4.5% target mid-point,” said Jason Tuvey, deputy chief emerging markets economist at Capital Economics.
Meanwhile, the U.S. consumer price index rose 0.3% last month, the largest gain since April, cementing market expectations of a 25-basis-point cut by the Fed on Dec. 18.
Economists polled by Reuters had forecast the index would rise 0.3%.
Separately, South African retail sales rose 6.3% year on year in October after rising by a revised 1.1% in September, data showed.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index closed about 0.3% lower.
South Africa’s benchmark 2030 government bond was stronger, with the yield down 4 basis points at 8.93%.
(Reporting by Tannur Anders and Bhargav Acharya; editing by Barbara Lewis)
