South African rand jumps as dollar weakens, local data in focus

JOHANNESBURG (Reuters) -The South African rand jumped on Wednesday as the dollar slipped ahead of the U.S. Federal Reserve’s interest rate decision and after local consumer price index (CPI) and retail sales data.

At 1544 GMT, the rand traded at 18.7600 against the dollar, 0.86% stronger than its previous close.

The dollar last traded almost 0.3% weaker against a basket of global currencies.

Year-on-year inflation edged higher to 4.8% in August from 4.7% in July, Statistic South Africa data showed on Wednesday, but remained within the central bank’s target range of 3% to 6%.

Analysts said after the CPI release that they still expected interest rates to be left unchanged on Thursday.

“We doubt that this will prompt the South African Reserve Bank to restart its tightening cycle tomorrow,” Jason Tuvey, emerging markets economist at Capital Economics, wrote in a research note.

The U.S. Federal Reserve is due to announce its main interest rate decision later on Wednesday. It is widely expected to keep interest rates on hold.

Focus will be on the Fed’s tone and economic forecasts, RMB analysts said in a note, adding that a hawkish tone would weaken the rand.

Statistics agency data on Wednesday showed that retail sales fell 1.8% year-on-year in July after declining by a revised 1.8% in June.

On the Johannesburg Stock Exchange, both the blue-chip Top-40 index and the broader all-share index ended the day over 1% stronger.

South Africa’s benchmark 2030 government bond was marginally stronger, with the yield down 3 basis points to 10.455%.

(Reporting by Tannur AndersEditing by Anait Miridzhanian and Mark Potter)