JOHANNESBURG: South Africa's rand fell to its weakest in a week early on Thursday as the dollar gained after the U.S. Federal Reserve's latest policy statement indicated it was still on track to raise interest rates this year.
At 0628 GMT the rand had slipped 0.28 percent to 11.6100 per dollar from an overnight close of 11.5775, cooling after a rally that saw it gain more than half a percent.
The upbeat tone of the much-anticipated Fed statement surprised growing market bets that the bank would push a rate hike to 2016 over softening inflation and a grim global growth outlook.
Government bonds continued to rally, with yields on the paper due in 2026 falling 3 basis points to a fresh 20-month low of 7.075 percent.
Eyes now turn to the South African Reserve Bank's (SARB) rate decision later in the session, with its monetary policy committee expected to hold rates despite inflation trending well below the bank's upper target of 6 percent.
"Our own view is for the MPC to keep interest rates stable, despite falling inflation expectations which theoretically give SARB some scope to ease monetary policy somewhat in a bid to spur GDP growth," NKC Independent Economists said in a research note.
Stats S.A. releases its December producer price index at 0930 GMT, with a Reuters poll predicting factory prices to have slowed to 6 percent year-on-year from 6.5 percent.
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