Rand slips as US inflation points to Fed rate hike

Johannesburg - The rand slipped against the dollar on Friday as US consumer inflation edged up, boosting the likelihood of a rate hike by the Federal Reserve later this year.

At 16:20 GMT the unit edged 0.2% weaker to R11.8660 per dollar, wiping out gains that saw it break through the R11.75/$ technical barrier for the first time in 3 weeks following a hawkish policy statement by the central bank on Thursday.

"The USD-ZAR test to 11.7300 yesterday highlights the risk of a downside break on the pair, but the failure to hold these levels confirms strong support around 11.7600/7800," economists from ETM Analytics said in a note.

Government bonds tracked the currency weaker as yields rose, with the benchmark paper due in 2026 adding 9 basis points to 8.05%.

"Their CPI numbers came in a touch higher than expected. This led to the rand weakening, and as such bonds followed," said Dale Forssman, a bonds trader with World Wide Capital Securities, referring to the US inflation data.

Headline inflation in the world's largest economy rose 0.1% in April after increasing 0.2% in March, with the uptick in spending activity reviving views of a lasting recovery in the US.