JOHANNESBURG (Reuters) -The South African rand gained on Wednesday ahead of a Federal Reserve interest rate announcement that will set the tone for markets globally.
At 1508 GMT, the rand traded at 18.2750 against the dollar, over 1% stronger than its closing level on Tuesday.
The dollar was last down around 0.45% against six rivals.
“The rand has seen some reaction ahead of the (Federal Open Market Committee) meeting tonight, in anticipation that the terminal rate will be reached,” said Investec Chief Economist Annabel Bishop in a research note, referring to the rate at which the Fed will end its 14-month hiking cycle.
The Fed is widely expected to raise interest rates by 25 basis points when it concludes a two-day meeting on Wednesday.
Markets will be sensitive to the language used by the Fed to give an indication of its future interest rate plans, DailyFX analyst Warren Venketas told Reuters.
“A dovish slant to the decision could see (the dollar-rand exchange rate) back around 18.00 while any inclination or openness to remain aggressive could open up the 18.50 resistance handle once more,” he added.
The risk-sensitive rand often takes cues from global factors like U.S. monetary policy in the absence of major local drivers.
The South African Reserve Bank will release its interest rate decision later this month.
On Thursday, local investors will turn their attention to S&P Global’s Purchasing Managers’ Index (PMI) for April for clues on the health of the South African economy.
Shares on the Johannesburg Stock Exchange gained on Wednesday, with the blue-chip Top-40 index closing 0.96% higher, and the broader all-share index ending up 0.88%.
South Africa’s benchmark 2030 government bond was stronger with the yield down 7 basis points at 10.125%.
(Reporting by Tannur Anders and Alexander Winning; Editing by Bhargav Acharya and Ed Osmond)
