USD/ZAR trades near 13 1/2-month low, focus on FOMC, SARB

The USD/ZAR currency pair hovered just above a fresh 13 1/2-month low of 17.5916 on Tuesday ahead of the outcome of the Federal Reserve’s two-day policy meeting, South African CPI inflation report and South African Reserve Bank’s (SARB) policy decision.

Markets are now pricing in about a 67% chance of a 50 basis point Fed rate cut at the Fed’s September 17th-18th policy meeting, compared to a 30% chance a week ago.

Futures markets continued to price in 125 basis points of Fed rate cuts by the end of this year.

Additional focus will be on the upcoming US retail sales data for August due out later in the day.

Meanwhile, the South African Reserve Bank is largely expected to lower its benchmark interest rate by 25 basis points to 8% at its September meeting.

The key repo rate was kept at a 15-year high of 8.25% for seven consecutive policy meetings.

The CPI inflation data for August, due out a day before the SARB’s interest rate decision, will also be closely watched by Rand traders.

South Africa’s annual inflation rate eased to 4.6% in July, or a three-year low that further approached the South African Reserve Bank’s target of 4.5%.

As of 10:21 GMT on Tuesday the USD/ZAR currency pair was little changed to trade at 17.6061.