South African rand strengthens after Fed rate decision

Photo illustration of South African bank notes displayed next to the American dollar notes in Johannesburg
South African bank notes featuring images of former South African President Nelson Mandela (R) are displayed next to the American dollar notes in this photo illustration in Johannesburg, File. REUTERS/Siphiwe Sibeko

JOHANNESBURG, March 23 (Reuters) - South Africa's rand strengthened in early trade on Thursday, as the dollar hovered around seven-week lows after the U.S. Federal Reserve signalled that its rate hike campaign could be nearing the end.

The Fed on Wednesday raised interest rates by a widely expected 25 basis points (bps) and indicated it might pause further increases after the recent collapse of two U.S. banks.

At 0630 GMT, the rand traded at 18.1475 against the dollar, 0.89% stronger than its previous close.

The dollar index , which measures the currency against six rivals, was last trading down 0.44% at 101.99.

Headline inflation in South Africa rose slightly in February to 7% from 6.9% in January, data showed on Wednesday, fuelling bets that the South African Reserve Bank (SARB) would hike interest rates by 25 bps at its meeting next week.

"The latest headline CPI print corroborates the case for the SARB to remain hawkish next week in an effort to curb inflation," ETM Analytics said in a research note.

The government's benchmark 2030 bond was stronger in early deals, with the yield down 14.5 bps to 9.850%.

Reporting by Bhargav Acharya; Editing by Sonia Cheema

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