USD/ZAR: Rand gives up gains ahead of SA CPI, SARB decision

The South African Rand gave up earlier gains against a weaker US Dollar on Monday amid investor optimism that US interest rates may have reached a peak.

The Rand was last 0.33% weaker against the greenback, with traders expecting South African CPI inflation report on Wednesday and a policy decision by the South African Reserve Bank on Thursday.

A cooling US labor market and an easing consumer inflation, as indicated by the most recent data, added to prospects that the Federal Reserve could begin easing monetary conditions sooner than anticipated.

“We’ve seen a pretty significant narrative shift over the last week or so in the markets on the Fed policy and when the Fed will cut interest rates first and how aggressively it will be cutting rates,” Kyle Rodda, market analyst at Capital.com, was quoted as saying by Reuters.

Market players now turn their attention to the minutes from the Fed’s latest policy meeting, due out on Tuesday, for further clues on its interest rate trajectory.

Meanwhile, the South African Reserve Bank is largely expected to leave its benchmark interest rate without change at 8.25% at its November meeting.

The CPI inflation data for October, due out a day before the SARB’s interest rate decision, will also be closely watched by Rand traders.

South Africa’s annual inflation was reported to have accelerated for a second consecutive month in September, to 5.4%, from 4.8% in August. Yet, the inflation rate remained within the SARB’s 3%-6% target range.

“Investors are closely watching for the upcoming… local CPI numbers for further market direction. We also have our local interest rate decision with no change expected,” Andre Cilliers, currency strategist at TreasuryONE, said.

As of 9:02 GMT on Monday USD/ZAR was edging up 0.33% on the day to trade at 18.4194.