South Africa’s rand gains ahead of Fed decision

The rand firmed nearly 1% in late afternoon trade on Wednesday, shrugging off the electricity crisis at home, as investors bet the US central bank will maintain a dovish stance.

At 1503 GMT, the rand traded at R14.37 per dollar, 0.8% stronger than its New York close on Tuesday.

The US Federal Reserve on Wednesday is expected to hold interest rates steady, shave the number of hikes projected for the rest of the year. The decision is expected at 1800 GMT.

“The key focus will be on the path of interest rates as well as details on plans to stop its balance sheet wind-down,” said RMB analysts Mpho Tsebe and Kate Rushton. “A dovish Fed will trigger a risk-on rally for risk assets.”

On the domestic front, data showed retail sales rose 1.2% year-on-year in January after declining 1.6% in December, while inflation was in line with forecasts in February at 4.1% annually.

The February inflation print supported expectations the South African Reserve Bank will keep interest rates unchanged at its meeting next week.

On the bourse, stocks ended lower, snapping a five-day winning streak as traders booked profits amid a downbeat sentiment in overseas markets.

The blue-chip JSE Top 40 index ended 1.3% lower at R49,82 and the broader All-share index lost 1.2% to 56,145.

In fixed income, the yield on the benchmark government bond due in 2026 was down 1.5 basis points to 8.745%.