JOHANNESBURG – South Africa’s rand held its ground against the dollar on Wednesday, tracking generally firmer emerging markets after investors bet that the Federal Reserve could signal a slower than expected pace in raising U.S. rates.
The local unit climbed about 1 percent from Tuesday’s close to a session high of 11.7705 but pared its gains to trade 0.46 percent firmer at 11.8315 by 1518 GMT.
“We’ve seen a broader strengthening in emerging markets currencies … and that appears to be a function of dovish expectations ahead of the (Fed) minutes this evening,” said ETM analyst Jana de Deventer.
Minutes of the Fed’s March meeting were due to be released later on Wednesday, with traders awaiting clues on whether policymakers were concerned about the dollar’s recent strong gains and its impact on U.S. growth.
“In the event that the Fed communicates persistent commitment to normalise interest rates, then we could see the dollar really gain,” de Deventer said.
“If they maintain a more cautious stance on monetary policy then that could serve as a catalyst for more gains on emerging currencies like the rand.”
South African government bonds climbed in line with the currency, and the yield on paper maturing in 2026 inversely shed 8 basis points to 7.61 percent.