Johannesburg - South Africa's rand edged firmer against the dollar on Wednesday, boosted by higher-than-expected inflation data that led foreign currency traders to price in an interest rate increase this week.

At 17:15 SA time the rand was trading at 10.4095 versus the dollar, recovering from a session low of 10.4750 and up 0.29 percent from where it ended New York trade on Tuesday.

“The rand was a little bit weaker this morning but is doing quite well this afternoon. The CPI numbers were a bit higher than expected and it looks like the foreign exchange market is discounting higher interest rates tomorrow,” said Bidvest Bank chief dealer Ion De Vleeschauwer.

“Everyone seems very happy to be long rand.”

South Africa's headline consumer inflation quickened to 6.1 percent year-on-year in April, slightly above market expectations, from 6.0 percent in March, Statistics South Africa data showed.

This signal that price pressures are rising could nudge the Reserve Bank into hiking interest rates when it concludes its third policy meeting of the year on Thursday, adding to a 50 basis point increment in January.

Economists polled by Reuters last week, however, expected rates to stay on hold at 5.5 percent as economic growth remains sluggish around 2 percent.

Government bonds climbed higher on Wednesday, lifted by rekindled offshore interest in South African assets.

Foreign accounts bought 3.9 billion rand ($374 million) in South African shares and the same amount in bonds last week, according to data from the Johannesburg Stock Exchange.

The yield for the 2026 government bond dipped 3.5 basis points to 8.17 percent while debt maturing in 2015 was yielding 6.67 percent, down 4 basis points from the previous day's close. - Reuters