South African rand strengthens ahead of inflation data

JOHANNESBURG (Reuters) -The South African rand strengthened against the dollar on Tuesday, ahead of closely-watched local inflation figures which could offer investors clues on the central bank’s potential rate path at its next policy meeting next month.

At 1539 GMT, the rand traded at 18.7425 against the dollar, nearly 0.2% firmer than its previous close.

The rand has had a strong start to the week, jumping over 1% on Monday as market sentiment improved, despite the conflict in the Middle East.

The dollar index was last down 0.18% against a basket of major currencies.

The South African Reserve Bank (SARB) said on Tuesday that upside risks to inflation had strengthened over the past months, heightening uncertainty about a precise path for inflation.

In its October Monetary Policy Review, the SARB said the rise in oil prices, dry weather conditions and elevated inflation expectations were all negatively impacting the inflation outlook.

Focus on Wednesday will now be on Statistics South Africa, which will release September consumer inflation data at about 0800 GMT.

However, analysts have warned that the rand, like most emerging market currencies, also continues to be swayed by other international developments such as the war between Israel and the militant group Hamas, and U.S. monetary policy.

Shares on the Johannesburg Stock Exchange closed lower, with the blue-chip Top-40 index ending down nearly 0.4%.

South Africa’s benchmark 2030 government bond was weaker, the yield up 2.5 basis points to 10.760%.

(Reporting by Tannur Anders and Bhargav Acharya; editing by Miral Fahmy and Emelia Sithole-Matarise)