Rand snaps two-day gains

Johannesburg - The rand weakened against the dollar on Wednesday, as uncertainty over a key US federal reserve policy statement overshadowed retail sales and inflation data that backed the case for a domestic rate hike this week.

The rand rallied briefly after Statistics South Africa said consumer inflation quickened more than expected to 6.4% year-on-year in August, while retail sales rose 2.4% in July.

The data could tilt the South African Reserve Bank towards hiking interest rates for the third time this year, although the majority of economists polled by Reuters last week expected rates to stay on hold as the economy struggles to grow.

But rand bears quickly resumed their onslaught on the currency in late Johannesburg trade, amid speculation that the Federal Reserve could signal higher rates in the US, in its own policy statement later on Wednesday.

At 15:17 GMT, the rand was at 10.9480/$, off a session high of 10.8970 and down 0.4% from Tuesday's close in New York.

"It's just an indication of some nervousness lingering ahead of the Fed. It comes coupled with that referendum vote in Scotland tomorrow," said Sean McCalgan, a market analyst at ETM.

Analysts believe a vote in favour of Scotland's independence from the United Kingdom in Thursday's referendum would generally be negative for emerging markets.

"People are not wanting to be caught too far on one side of the trade because there are a lot of mixed expectations in terms of both these events," McCalgan said.

South African government bonds fared better than the rand in the risk-off environment, with the yield on the benchmark instrument due in 2026 inversely shedding 7.5 basis points to 8.19%.