JOHANNESBURG (Reuters) – The South African rand rose in early trade on Wednesday, but hovered near an eight-month low hit in the previous session on some caution ahead of an update on municipal elections results and the outcome of a U.S. Federal Reserve policy meeting.
At 0615 GMT, the rand traded at 15.4100 against the dollar, 0.26% firmer than its previous close. The currency fell to 15.4925 on Tuesday, its weakest since early March.
Vote counting after Monday’s local poll was still underway and the electoral commission was expected to provide updated results later in the day.
Partial results showed on Tuesday that voter support for the ruling African National Congress (ANC) was set to drop below 50% for the first time since it ended white minority rule in 1994. read more
Market focus was also on the result of the Fed meeting, as investors looked to assess how the U.S. central bank plans to combat rising inflation and ease worries about economic recovery.
The Fed on Wednesday is expected to approve plans to scale back its $120 billion monthly bond-buying program put in place to help the economy during the pandemic. Investors will also be focused on commentary about interest rates and how sustained the recent surge in inflation is. read more
“Ahead of this, the local unit is likely to trade cautiously, as has been the case of late,” Nedbank analysts said in a note.
Higher rates in developed countries often drain capital away from higher-yielding but riskier emerging markets such as South Africa, weighing on their currencies.
In fixed income, the yield on the benchmark 2030 government bond was up 1.5 basis points to 9.645% in early deals.