The South African rand gained against the dollar on Tuesday, as global risk appetite improved amid signs that the U.S. Federal Reserve may stop raising interest rates soon. The rand traded at 18.3300 per dollar at 0641 GMT, 0.11% stronger than its previous close. The dollar index, which measures the greenback against a basket of major currencies, fell 0.15%. The rand, which is sensitive to changes in global sentiment, benefited from the easing of concerns over the U.S.-China trade war and the outlook for the world’s largest economy.
Investors are awaiting the release of the minutes of the Fed’s last meeting later in the day, which could provide clues on whether the central bank will pause its rate hike cycle after four increases in 2021. Some Fed officials have recently signaled that they are open to a more cautious approach, given the signs of slowing growth and inflation in the United States. The rand was also supported by domestic factors, such as the publication of the central bank’s leading indicator, which collects data on economic activity in Africa’s most industrialized nation. The indicator rose 0.6% year-on-year in September, after a 0.3% increase in August. On Wednesday, the market will focus on the inflation figures for October, which are expected to show a slight increase from 4.9% to 5.0% year-on-year, still within the central bank’s target range of 3-6%.
On Thursday, the South African Reserve Bank (SARB) will announce its interest rate decision, which is widely expected to keep the repo rate unchanged at 3.5%, after cutting it by 300 basis points in 2021 to support the economy amid the COVID-19 pandemic. The SARB has said that it sees the risks to the inflation outlook as balanced, but that it remains concerned about the fiscal situation and the impact of power cuts on growth. South Africa’s benchmark 2030 government bond was stronger in early trade, with the yield down 7 basis points to 9.985%.
Source: [Reuters]Â
