Johannesburg - South Africa's rand edged up against the dollar on Wednesday as global risk appetite improved, but market analysts said it could end the week on the back foot if the central bank issues a dovish policy statement.
By 18:21 SA time, the rand was changing hands at 10.6895 per dollar, up 0.4 percent from its previous close in New York.
In fixed income, government bonds were also firmer, with the yield on the 2026 benchmark issue easing 4.5 basis points to 8.42 percent while that on the 2015 note closed 2.5 basis points lower at 6.85 percent.
“Emerging market sentiment is fairly positive and that has supported the rand and bonds. We're all on watch for the MPC,” a Johannesburg trader said, referring to Reserve Bank Governor Gill Marcus's speech on Thursday, when she will announce the latest decision on interest rates.
The majority of 30 economists polled by Reuters this week expect the South African Reserve Bank (SARB) to keep its repo rate at 5.5 percent on Thursday despite rising inflation, as it seeks to ease pressure on the struggling economy.
“The MPC tomorrow exposes the rand more to the risk of inaction from the central bank given the SARB remains the only accommodative Fragile Five bank,” Tradition Analytics said in a market note.
The rand fell sharply at the last policy meeting in January when the central bank unexpectedly hiked its repo rate, but fell far short of steeper increases by emerging market peers like Turkey.
Both countries are among the so-called “fragile five” emerging market economies, also including India, Indonesia and Brazil, whose wide current account deficits, among other weaknesses, make them vulnerable to global capital flight. - Reuters