The rand was slightly weaker early on Wednesday, as analysts said the outcome of a US Federal Reserve policy meeting later in the day could leave it vulnerable to losses after strong gains this month.
At 08:25, the rand traded at R17.56 to the dollar.
The rand has gained about 7% against the greenback so far in July, helped by dollar weakness in the first half of the month, a commitment from Chinese policymakers to support their economy, and foreign buying of South African government bonds.
Kevin Lings, an economist at asset manager Stanlib, linked the foreign bond-buying to a decline in South African inflation and a decision by the Reserve Bank last week to leave its main interest rate on hold.
“(This) reflects the power of a credible central bank,” he wrote on Tuesday on X, the social media platform formerly known as Twitter.
Rand Merchant Bank said in a morning briefing that after recent gains “the rand is stretched too far”. Referring to the Fed’s interest rate decision later on Wednesday, it said “event risk is huge tonight” and that a sharp fall in the rand should not be ruled out.
Markets are betting on a 25-basis-point hike from the Fed on Wednesday, but they are split on the odds of another later in the year. If the Fed’s language is hawkish it could boost the dollar and leave emerging market currencies like the rand exposed.
