JOHANNESBURG (Reuters) – South Africa’s rand held firmer against the U.S. dollar early on Wednesday, with traders awaiting the outcome of the U.S. Federal Reserve policy meeting, while local focus was on retail sales.
At 0600 GMT, the rand traded at 16.4450 per dollar, 0.06% above its close on Tuesday.
The currency had climbed to its strongest in six weeks on Tuesday in a rally driven by renewed hopes for a COVID-19 vaccine and upbeat Chinese economic data, which have supported risk assets, such as emerging markets currencies.
In fixed income, the yield on the benchmark government bond rose by a basis point to 9.24%.
“D-Day for the Fed interest rate decision has arrived, following a day of global risk-on and a clawback by the rand,” said Bianca Botes, executive director at Peregrine Treasury Solutions in Pretoria.
“We can expect some volatility today, especially during the U.S. session this afternoon, with the rand setting its sights on R16.35/$.”
The Fed decision is due at 1800 GMT followed by a news conference by chairman Jerome Powell. Investors will look to details of the U.S. central bank’s plans to balance interest rates against its inflation target.
South Africa retail sales figures from July will also be in focus on Wednesday, giving an insight into the performance of the economy at the start of the third quarter. The consensus forecast is for the decline in sales to slow to 5% from 7.5% in June.
Economic output recorded its largest contraction ever in the second quarter as a strict lockdown shut down most activity.
(Reporting by Olivia Kumwenda-Mtambo; Editing by Tomasz Janowski)