South African rand slips, inflation fall drives bigger rate cut optimism
Updates prices as of 1501 GMT, adds analyst comment in paragraph 7
JOHANNESBURG, Nov 20 (Reuters) -South Africa's rand slipped on Wednesday against a buoyant dollar, despite inflation dropping to its lowest level in more than four years, and as investors geared up for a policy announcement by the central bank on Thursday.
At 1501 GMT, the rand traded at 18.1350 against the dollar ZAR=D3, about 0.5% weaker than its previous close.
Trade in the local currency has been volatile as investors sought safe-haven assets amid escalating tensions between Russia and Ukraine and as the dollar benefited from Donald Trump's U.S. election win.
October inflation cooled to 2.8% from 3.8% in September ZACPIY=ECI, Statistics South Africa data showed on Wednesday, one day before the South African Reserve Bank will announce its final monetary policy decision for the year.
Inflation has only been below 3% in a handful of months in the past two decades. The SARB aims for the 4.5% level, the midpoint of its 3% to 6% target range.
Economists polled by Reuters expect the central bank to reduce the repo rate by 25 basis points on Thursday.
"With South Africa's inflation falling to 2.8%, its lowest since June 2020, expectations for a 50 basis points cut by the SARB have increased, heightening the rand's vulnerability," said Zain Vawda, market analyst at MarketPulse by OANDA.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index .JTOPI closed about 0.8% up.
South Africa's benchmark 2030 government bond ZAR2030= was stronger, with the yield down 6.5 basis point to 9.045%.
Reporting by Bhargav Acharya and Tannur Anders; Editing by Andrew Heavens and Jonathan Oatis
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