Rand flat with all eyes on US Fed

The rand traded flat early on Wednesday as caution before a US central bank policy decision kept investors on the sidelines.

At 0650 GMT the rand was flat at 16.63 per dollar, having reached 16.57 in Asia before falling back as the global optimism that had driven it to a near three-month high continued to give way.

The US Federal Reserve is not expected to cut interest rates when it meets later in the day, but it is seen taking steps to curb a recent rise in bond yields. Its forecasts for the US economy will also be close watched.

“Any unexpected addition to the Fed’s stimulus program and a more dovish than expected statement or a less-bearish-than-before outlook on economic recovery prospects would re-ignite the risk-on rally of late,” ETM Analytics said in a note.

“Further out, the ZAR-case remains a bullish one with a strong H2 expected on account of the local unit’s stretched undervaluation versus the dollar and eventual economic recovery prospects.”

Bonds inched up in early trade, with the yield on the government issue due in 2030 down 2 basis points to 9.095%.