JOHANNESBURG, South Africa — South Africa’s rand weakened against the US dollar on Wednesday as rising oil prices heightened inflation concerns, with investors awaiting the US Federal Reserve’s interest rate decision for signals about the direction of global monetary policy.

At 06:52 GMT on October 28, the rand traded at 16.68 per dollar, down 0.2% from its previous close, according to Reuters. The currency’s movement reflected pressure from international markets ahead of the Fed’s policy announcement later in the day.

Oil prices rose by more than 1% after an attack on a refinery in Saudi Arabia renewed concerns about potential supply disruptions from a major oil-producing country. Higher crude prices can increase import costs and intensify inflationary pressure, creating additional challenges for economies sensitive to global energy prices.

For South Africa, developments in international commodity markets and US monetary policy are important influences on the rand, particularly when domestic economic data offers limited direction to investors.

Investors Await Federal Reserve Decision

The Federal Reserve was scheduled to announce its latest policy decision at 18:00 GMT on Wednesday. Investors were also watching for US Personal Consumption Expenditures inflation data due on Thursday, a key measure used by the central bank to assess price pressures.

Market expectations reported by Reuters indicated that traders largely anticipated the Fed would leave interest rates unchanged at the October meeting. However, investors were assessing the possibility of further tightening in December, reflecting concerns about the future path of US monetary policy.

Higher US interest rates can make dollar-denominated assets more attractive to investors, potentially putting pressure on emerging-market currencies such as the rand. The effect depends on the Fed’s decision, its guidance and wider market conditions.

ETM Analytics warned that the rand could weaken beyond 17 per dollar if higher oil prices and pressure linked to US monetary policy persisted.

Stocks and Government Bonds Also Weaken

South African financial markets also recorded modest losses during early trading.

The Johannesburg Stock Exchange’s Top-40 index fell by approximately 0.2%, while the yield on the government’s benchmark 2035 bond rose by two basis points to 8.6%.

Bond yields generally rise when bond prices fall, reflecting changing investor demand and expectations about interest rates, inflation and government borrowing conditions.

With major domestic economic releases absent from Wednesday’s calendar, investors were expected to remain focused on international developments, including oil-market risks, US inflation data and the Federal Reserve’s policy outlook.

The rand’s next move will depend partly on how these factors evolve and whether global conditions increase pressure on emerging-market assets.

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