South African rand muted ahead of inflation data, expected rate hike

Business Recorder reported that the South African rand was little changed in early Wednesday trading as investors waited for August inflation figures and a monetary policy decision due later in the day. At 0616 GMT the currency stood at 16.2125 per dollar, roughly 0.2% weaker than its prior close.

Statistics South Africa is scheduled to release August inflation figures at 0800 GMT. Analysts polled by Reuters expected annual inflation to rise to 4.5% from 4.3% in July, while Nedbank economists forecast it would hold at 4.3% because lower fuel prices reduced transport costs. Because it imports much of its fuel, the country is sensitive to changes in worldwide energy costs.

The South African Reserve Bank announces its rate decision later today, with a 25-basis-point increase widely anticipated after it held rates at the previous meeting. Nedbank economists see inflation staying above target for another 10 months, a stretch they argue could damage policy credibility and shake expectations. ETM Analytics said the rand's firm performance depends on a hike, adding that a decision to hold could bring considerable disappointment. The 2035 benchmark bond held steady at a yield of 8.585% during initial trade.