The rand spent Wednesday morning trading around R16.45 to the dollar, in markets already uneasy after attacks on two vessels in the Strait of Hormuz pushed oil prices back up. Then Washington published its September inflation figures, and the rand quickly weakened to R16.66. There was no South African news behind the move: with no major local data due, the currency took its cue from abroad, as it usually does on days like this.
How American prices reach the rand
The link runs through the Federal Reserve, the US central bank, which sets the interest rate that dollar savings earn. When the Fed raises rates, money parked in dollars earns more, and rand assets look less appealing beside it. So a figure that makes a US hike more likely pulls money towards the dollar, and the rand pays for it.
September's figures did exactly that. Prices rose faster than economists expected on the measures that count. Over the year the headline rate reached 3.7%, a notch above forecasts, and the core rate, which leaves out food and energy, beat its forecast too. In September alone prices rose 0.6%, after 0.4% in August.
Traders moved fast. Money markets put the chance of another Fed hike this month at about 41%, up from closer to 20% before the data, according to LSEG, and all but locked in a further rise in December. Yields on two-year US Treasuries, the government bonds most sensitive to where rates are heading, jumped on the day. The dollar climbed to its strongest level against a basket of currencies since April 2025.
The JSE fell, and South African bonds held
The damage was uneven at home. The JSE's All-Share index closed almost 1% lower, and platinum miners Valterra and Implats were among the worst performers, down 5% and 4%.
South Africa's own benchmark government bond, which matures in 2035, went the other way. Its yield fell to 8.74%, and a falling yield means the bond's price rose, so on the day the rand slid, the government's own borrowing got slightly cheaper.
The next move is up to the Fed, which could raise rates as soon as this month. Until it decides, the rand will keep reading American data as closely as its own.
