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Johannesburg - The rand rallied to its highest in nearly two weeks against the dollar on Tuesday as investors anticipating a rate hold by the US Federal Reserve kept demand for the local currency alive.
Shares fell, led by weaker gold stocks as cautious investing kicked in ahead of the US rates decision on Wednesday.
At 1528 GMT, the rand was trading at 13.8700 per dollar, 1% firmer than its New York close on Monday. The currency was at its strongest levels since Sept. 8, according to Thomson Reuters data.
The rand also drew support from some calming of local political tensions, and from Moody's comments that the probability of a rating downgrade to junk was now less than 50%.
Markets in Africa's most industrialised economy were rattled earlier this month by reports that an elite police unit known as the Hawks was investigating Finance Minister Pravin Gordhan's role in setting up a surveillance unit at the tax service, suspected of spying on politicians.
"The market has became slightly less concerned about South Africa's political environment, we have seen noise surrounding Finance Minister Gordhan and the Hawks die down quite a lot, focus has shifted away from that," ETM Analytics market analyst Jana van Deventer said.
"We have got the Fed meeting coming up tomorrow which is the main risk event for the week. At this point, markets seem quite comfortable with pricing in an unchanged policy outcome."
Locally, the South African Reserve Bank is expected to leave interest rates unchanged on Thursday.
On the stock market, the benchmark Top-40 index fell 1.39% to 44 864 points, while the All-Share index dropped 1.23% to 51 335.
The bourse bucked global market trends as local gold stocks fell with investors cautious ahead of the Federal Reserve and Bank of Japan policy meetings that will conclude on Wednesday.
"We could see a bounce in the gold stocks post-Fed commentary," said BP Bernstein trader Vasili Tirasis.
Bullion miner Sibanye Gold Limited fell 3.15% to R46.97, Gold Fields Limited dropped 2.52% to R66.52, Harmony Gold weakened 2.58% to R45.72 and AngloGold Ashanti Limited fell 2.18% to R210.86.
In fixed income, the yield on the benchmark government issue due in 2026 added 0.5 basis points to 8.6%.
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