Rand weakens after inflation data

Johannesburg - The rand weakened against the dollar on Wednesday ahead of Thursday's interest rate decision after a lower-than-expected inflation number reduced the odds of a rate hike.

At 16:33, the rand was trading 0.59% weaker at R12.3990 to the dollar compared with its closing level on Tuesday.

"The downside surprise to CPI generated some selling pressure given that the market interpreted it as an indication that the SA Reserve Bank is going to refrain from hiking tomorrow," said Jana van Deventer, a market analyst with ETM Analytics.

South Africa's headline consumer inflation quickened to 4.7% year-on-year in June, well below expectations, compared to 4.6% in May, data from Statistics South Africa showed.

Emerging market currencies were also under pressure due to renewed dollar strength, van Deventer said, as traders ponder the timing of a U.S. Federal Reserve rate increase this year.

Analysts had been almost evenly split on whether South Africa - caught between the prospect of rising inflation and sickly growth - would keep interest rates steady at 5.75% or raise them by 25 basis point.

Government bonds strengthened, with the yield for the 2026 benchmark was down 3 basis points to 8.125%.