Rand weaker after upbeat Fed; traders cautious before CPI

The rand retreated on Wednesday as the dollar gained after upbeat comments from the US central bank. Short sellers covered their positions before local inflation data and a decision on interest rates.

At 0640 GMT the rand was 0.34% weaker at 13.31 per dollar, compared with a close of 13.26 overnight in New York, after Federal Reserve Chairman Jerome Powell said the United States was on track for years of steady growth.

The dollar against most currencies after his comments. Global stocks rose as well. But rand buyers who took advantage of a yield differential retreated to safe assets.

June inflation data due at 0800 GMT is expected to show South African consumer prices rising, confirming a Reserve Bank’s forecast in May that inflation had troughed, setting the stage for hawkish stance at the bank’s meeting on Thursday.

That would diminish the rand’s carry-trade appeal and push it back towards the 13.50 mark, traders said, with the trade conflict between Washington and Beijing continuing to temper global risk demand.

Bonds were also weaker, with the yield on the benchmark paper up 4 basis points to 8.71%.

The Johannesburg Stock Exchange’s Top 40 Index was set to open firmer at 0700 GMT, with the futures index up 0.38%.