Rand flat, market on edge ahead of Fed meeting

Johannesburg - The rand held its ground above the psychological 10 mark against the dollar on Friday, but was unlikely to post significant gains due to nervous trade ahead of the US Federal Reserve's meeting next week.

Investors are still unsure whether the world's leading central bank will start to scale back its monthly asset purchases, which have resulted in billions of dollars of cheap money flocking to emerging markets.

The rand traded at R9.9715 against the greenback at 06:36 GMT, only a breath away from Thursday's close at R9.9725.

Government bonds were flat to weaker, with the 2026 benchmark unchanged at 8.195%, while the shorter-dated 2015 issue added 4.5 basis points to 6.11%t.

The local currency touched four-week highs earlier in the week, boosted by stronger-than-expected factory output data and an end to strikes in some sectors of the economy, which has been hit by labour unrest since late last year.

But concerns about the withdrawal of investment from emerging markets once the Fed starts easing back on its monetary stimulus are weighing on high-yielding riskier currencies like the rand.

"Having obsessed over the Fed for months, the markets experienced a relief rally of sorts this week but this was never sustainable ahead of next Wednesday's decision on tapering," said Rand Merchant Bank currency analyst in a note.

"Expect jumpy and nervous trade."