JOHANNESBURG (Reuters) -The South African rand extended its gains on Thursday after U.S. inflation unexpectedly fell last month, fuelling bets that the Federal Reserve may cut interest rates in September.
At 1521 GMT, the rand traded at 18.0050 against the dollar, 0.6% stronger than its previous close.
The dollar index was last down 0.6% against a basket of currencies.
The U.S. consumer price index dipped 0.1% in June after being unchanged in May, while the annual increase was the smallest in a year, data showed, reinforcing views that the disinflation trend was back on track.
U.S. inflation has been improving in recent months and earlier this week Fed Chair Jerome Powell said that “more good data would strengthen” the case for central bank interest rate cuts.
Like most emerging market currencies, the rand often takes cues from U.S. economic data in addition to local factors.
“The domestic currency is mainly influenced by global financial markets, strengthening as indications of a US rate cut rise,” said Investec Chief Economist Annabel Bishop.
Locally, Statistics South Africa data showed mining production was unchanged while manufacturing output fell 0.6% year-on-year in May.
On the Johannesburg Stock Exchange, the blue-chip <Top-40 index closed 0.9% higher.
South Africa’s benchmark 2030 government bond was stronger, with the yield down 15.5 basis point to 9.570%.
(Reporting by Tannur Anders and Bhargav Acharya, Editing by Bernadette Baum and Angus MacSwan)
