The rand leapt as the dollar slumped after softer-than-expected US consumer inflation data boosted expectations that the Federal Reserve might be done with interest rate hikes.

At 8.30am on Wednesday, the rand traded at R18.24/US$, more than 2% stronger than its close on Monday. The dollar last traded about 1.1% weaker against a basket of global currencies.

US consumer prices were unchanged in October amid lower petrol prices, and underlying inflation showed signs of slowing, supporting views that the Fed was probably done raising interest rates.

“A softer inflationary impulse in the US … all but ends any remaining bets that the US Federal Reserve might still hike interest rates further in the current cycle,” said Danny Greeff, co-head of Africa at ETM Analytics.

If softer inflation is sustained, “it will also support the case for the Fed to take its feet of the brakes and gradually turn more growth-sensitive through the months ahead”, he added.

Like other risk-sensitive currencies, the rand often takes cues from global drivers such as US monetary policy as well as local data points.

Locally, South Africa’s unemployment rate fell to 31.9% in the third quarter of this year from 32.6% in the second quarter, statistics agency data showed on Tuesday. — Tannur Anders, (c) 2023 Bloomberg LP