Johannesburg - South Africa's rand firmed against the dollar on Tuesday, taking impetus from benign US inflation numbers and reports that striking metalworkers were mulling a new wage deal to end a three-week stoppage.

The unit strengthened to a three-week high of 10.5600 after US consumer price inflation rose by just 0.3 percent in June, fuelling expectations that the Fed would delay its tapering program and a decision to hike rates.

“We have actually seen a positive response on emerging market currencies to that number,” Jana van Deventer, an economist at ETM Analytics, said.

The rand nudged up 0.21 percent to 10.5800 versus the dollar at 16:46 SA time.

Hopes for an end to a three-week strike by more than 200,000 workers in the metals and engineering sector also boosted the currency after union NUMSA said its members would consider a fresh wage offer proposed by a government mediator.

South Africa releases June CPI data on Wednesday at 10:00 SA time.

Market watchers are expecting inflation to edge up by at least 0.1 percent to 6.7 percent, outside the central bank's target band of between 3 and 6 percent.

“The rand reacting positively to a higher CPI number initially is unlikely, so we might see an initial sell-off. After that the currency could find some renewed resilience on the back of mounting rate hike expectations,” van Deventer said.

In fixed income, government bonds weakened slightly, with yields on the paper due in 2015 and the longer-dated 2026 paper adding 5 basis points to 6.705 percent and 8.17 percent respectively. - Reuters