(Reuters) – The South African rand strengthened on Tuesday, as the dollar retreated ahead of the Federal Reserve’s meeting, with investors focusing on the idea the U.S. central bank could shift to a less-aggressive policy narrative.
At 1557 GMT, the rand ZAR=D3 traded at 18.2600 against the dollar, 0.61% stronger than its previous close.
Investors widely expect the Fed this week to raise its benchmark overnight interest rate by 75 basis points (bps), but for December, the fed funds futures market has priced in a 57% probability of a 50-bps increase amid suggestions from Fed officials of potentially slowing down the tightening pace.
Improved risk sentiment in the market ahead of Fed decision has helped emerging market currencies such as the rand.
Earlier on Tuesday a South African purchasing managers’ index showed that manufacturing activity improved in October, but rolling power cuts and a crippling strike at freight rail and ports company Transnet prevented a stronger recovery.
On the Johannesburg Stock Exchange, the Top-40 .JTOPI index closed 1.28% higher, while the broader all-share .JALSH index ended up 1.11%.
Naspers NPNJn.J and Prosus PRX.AS were the top gainers, rallying more than 8%, after technology investment firms rejected as “untrue” a press report on a potential sale of its 28% stake in Chinese software and gaming giant Tencent 0700.HK.
The South African government’s benchmark 2030 bond ZAR2030= was stronger in afternoon deals, with the yield down 5 basis points to 10.810%.
(Reporting by Bhargav Acharya and Anait Miridzhanian; Editing by Sherry Jacob-Phillips and David Evans)
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