Rand falls after firm US consumer prices

South Africa’s rand fell on Tuesday as the dollar was buoyed by stronger-than-expected US inflation data, suggesting that the Federal Reserve may have to stay aggressive in raising interest rates.

US consumer prices unexpectedly rose in August and underlying inflation picked up amid rising costs for rents and healthcare, according to readings reported by the US Labour Department.

Fed officials will meet next week to deliver the interest rate decision, with traders betting on a third straight rate hike of 75 basis points (bps).

“With FOMC [Federal Open Market Committee] members, particularly Jerome Powell, communicating increasingly in favour of a 75bps increase in US interest rates, South Africa is now seeing a significant probability of one too next week,” Investec analyst Annabel Bishop said in a research note.

Like most emerging market currencies, the rand is highly susceptible to global drivers like the US monetary policy.

At 15:41 GMT, the rand traded at R17.39 per dollar, 1.55% weaker than its previous close.

The dollar index, which measures the currency against six rivals, was up 1.22% at 109.54.

On the local economic data front, figures from Statistics South Africa showed that the country’s total mining output in July dropped 8.4% year on year.

Shares on the JSE fell, mirroring the slump in global equities following the US inflation data.

Overall on the stock market, the Top 40 ended 2.23% lower while the broader All Share Index dipped 2.15%.

The government’s benchmark 2030 bond was little changed, with the yield up one basis point at 10.19%.