The JSE was fractionally higher on Wednesday as banks and retailers rose on a stronger rand while rand hedges weighed on the market.

Trading was cautious ahead of the Reserve Bank’s interest-rate decision on Thursday. Some economists are pricing in a 25 basis point hike, but the likelihood of that happening has fallen following the release earlier of favourable consumer inflation data. Inflation slowed to 4.9% year-on-year in August, from 5.1% in July, and better than the expected 5.2%.

The Bank will have to weigh up the effects of the firmer rand on the future inflation trajectory, with the monetary policy committee (MPC) tending to increase rates only when its inflation forecasts rise close to the upper limit of its 3% to 6% target range. It is important to remember, however, that the MPC makes its calls based on the next six to 24 months.

The rand was 1.5% firmer against the dollar at the JSE’s close, reaching R14.6221 to the dollar, its best level in just more than two weeks, in a weaker dollar environment. However, the local currency has still lost 18% against the dollar so far this year.

The all share closed 0.11% higher at 56,445.60 points and the top 40 added 0.10%. Banks rose 2.28%, platinums 1.86%, general retailers 1.44% and resources 1.27%. Industrials lost 0.95% and property 0.28%.

The losers among rand hedges included Richemont, down 4.36% to R119.83; British American Tobacco 2.23% to R684.19; AB InBev 1.76% to R1,316.38; and Naspers 0.47% to R3,165.

Standard Bank rose 3.21% to R180.21 and Absa 2.77% to R151.07.

Sasfin fixed-income trader Alvin Chawasema said the rand had benefited from the improved inflation data. "The dollar, somewhat unexpectedly, lost ground, losing its safe-haven status despite global trade-war concerns and as the sell-off in US treasuries continues."

He said the market was not really experiencing rand strength as such, and further volatile trade is to be expected. "It is not certain if the local currency will be able to sustain its rally and it may have gotten ahead of itself in anticipation of the Reserve Bank's decision on Thursday."

The benchmark R186 government bond was last bid at 9.095% from 9.205%.

The top 40 Alsi futures index gained 0.19% to 50,170 points. The number of contracts traded was 66,075 from Tuesday’s 123,440. Volumes have increased over the past few days ahead of this quarter’s close-out on Thursday.