Rand loses steam before crucial US CPI data

The rand dipped slightly against the dollar on Wednesday morning, ending a four-day winning streak that had put it a two-week high, supported in part by bond inflows.

The local currency slipped 0.35% to trade at R15.07/$ as traders await the release of key US consumer inflation figures on Wednesday afternoon.

US inflation has run above the US Federal Reserve’s 2% target for months now, leading to speculation that the central bank may have to increase interest rates sooner and faster than the market had expected.

But Fed chair Jerome Powell said last week the Fed would be “patient” before embarking on a tightening policy, citing slack in the labour market.  

US inflation is expected to have accelerated to an annual rate of 5.9% in October from 5.4% in September, according to a Bloomberg median estimate. Core inflation, which excludes volatile food and energy prices, probably rose to 4.3% from 4% on an annual basis.

The rand has been hypersensitive to perceptions of a change in US monetary policy, which influences global capital flows.

Over the past week, foreigners bought just more than R5bn worth of local bonds on a net basis, as global yields tumbled following the Fed’s dovish messaging and Bank of England held off on increasing rates.

Elsewhere, stock markets were in broad retreat in Asia while US stock futures suggested a weaker start on Wall Street. The JSE may follow suit when it opens.

Brent crude, which drove fuel prices in SA to record highs earlier in November and fanned inflation concerns, slipped 0.19% to $85.04 a barrel, after rallying for three consecutive days.

mahlangua@businesslive.co.za