South African rand muted ahead of inflation data, expected rate hike

A South African Rand is seen in this illustration picture taken November 5, 2020. REUTERS

JOHANNESBURG, Sept 23(Reuters) – The South African rand was muted in early trade on Wednesday as investors awaited inflation data and ​a monetary policy decision later in the day, ‌with the central bank widely expected to raise interest rates.

• At 0616 GMT, the rand traded at 16.2125 against the dollar , down about 0.2% ​from its previous close.
• Statistics South Africa is due ​to publish August inflation data  at 0800 GMT. Analysts ⁠polled by Reuters expect annual inflation to accelerate to ​4.5%, from 4.3% in July.
• However, Nedbank economists forecast headline consumer ​inflation would remain unchanged at 4.3%, citing lower transport costs due to a decline in fuel prices.
• As a net fuel importer, South Africa ​is heavily exposed to swings in global energy prices.
• Later in ​the day, the South African Reserve Bank will announce its policy decision, ‌with ⁠the central bank widely expected to deliver a 25-basis-point rate hike after leaving rates unchanged at its previous meeting.
• “Inflation looks set to remain above the target for some time, ​our forecast suggests ​another 10 ⁠months. This is long enough to undermine policy credibility and unsettle inflation expectations,” Nedbank economists ​said in a note.
• “The rand’s impressive resilience will ​depend ⁠on the SARB hiking, or it will reverse,” ETM Analytics said in a note, adding there was plenty of room for ⁠disappointment ​should the central bank not raise ​rates.
• South Africa’s benchmark 2035 government bond was steady in early deals, with the ​yield at 8.585%.

Reporting by Nilutpal Timsina; Editing by Alex Richardson