JOHANNESBURG: South Africa's rand firmed to its highest in four weeks against the dollar on Wednesday, helped by strong appetite for high yielding emerging market assets as investors anticipate low US interest rates low for longer this year. Stocks fell as heavily weighted rand hedges retreated on a stronger rand.
At 1515 GMT, the rand traded at 13.7000 per dollar, 1.55 percent firmer from its New York close on Tuesday.
The currency was at its strongest levels since Aug. 23, according to Thomson Reuters data.
It also drew support from data showing the headline inflation rate dipped below the top end of the central bank's target in August, helping consumers while suggesting policymakers will keep the benchmark repo rate at 7 percent this week, maintaining attractively high returns for foreign investors.
"While we expect the alleviated price pressures to be temporary of nature, this should provide the South African Reserve Bank the necessary justification to once again delay its interest rate hiking cycle at this week's meeting," NKC African Economics analyst Hanns Spangenberg said.
On the stock market, the benchmark Top-40 index fell 1.29 percent to 44,284 points, while the All-Share index dropped 1.13 percent to 50,757 points.
Rand-hedged stocks, or those that reap the bulk of their revenue outside of South Africa, led the fall as the rand gained while investors remained cautious ahead of the Fed meeting.
"The rand has strengthened a long way so all our big industrial stocks which are rand hedges are under pressure," said Cratos Capital equities trader Greg Davies.
Luxury goods company Richemont fell 3.04 percent to 80.16 rand, Naspers Limited dropped 3.03 percent to 2298.54 rand, British American Tobacco weakened 0.98 percent to 853.80 rand and drinks makers SABMiller fell 1.81 percent to 764.50 rand.
In fixed income, the yield for the benchmark government bond due in 2026 was up 1.5 basis points to 8.61 percent.
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