The South African rand was under pressure in early trade on Wednesday as higher oil prices fuelled inflation concerns, while investors awaited the US Federal Reserve’s policy decision later in the day for clues on the interest rate outlook.
At 0652 GMT, the rand traded at 16.68 against the dollar, down 0.2% from its previous close.
Oil prices rose more than 1% on Wednesday after an attack on a refinery in Saudi Arabia renewed concerns around supply risks from the major exporter.
Markets are awaiting the US Fed’s policy decision at 1800 GMT, as well as Personal Consumption Expenditures data, a key inflation gauge closely watched by the central bank, on Thursday.
Traders largely expect the Fed to leave rates unchanged on Wednesday but are pricing in an 84% chance of a December rate hike, according to the CME’s FedWatch Tool.
ETM Analytics said the rand could weaken beyond the 17.00-per-dollar level if rising oil prices and Fed-related pressures persist.
In the absence of major domestic data, the rand, like other emerging market currencies, tends to take direction from global factors, including US economic releases and geopolitical developments.
On the Johannesburg Stock Exchange, the Top-40 index was down about 0.2% in early trade.
South Africa’s benchmark 2035 government bond weakened in early deals, with the yield rising 2 basis points to 8.6%.
- The South African rand traded at 16.68 against the dollar, down 0.2% from its previous close at 0652 GMT on Wednesday.
- Oil prices rose more than 1% following an attack on a Saudi Arabian refinery, raising concerns about supply risks.
- Investors awaited the US Federal Reserve's policy decision at 1800 GMT and Personal Consumption Expenditures data due on Thursday.
- Traders expect the Fed to keep rates unchanged on Wednesday but assign an 84% chance of a rate hike in December according to the CME FedWatch Tool.
- South Africa's Top-40 index was down about 0.2%, while the yield on the 2035 government bond rose 2 basis points to 8.6% in early trade.
