The rand firmed in early trade on Wednesday, as the dollar pulled back from its overnight two-decade peak ahead of a US Federal Reserve policy meeting.

At 0633 GMT, the rand traded at 15.97 against the dollar, 0.41% stronger than its previous close.

The dollar index, which measures the greenback against a basket of six major peers, was trading at 104.89, after hitting 105.65 on Tuesday, its strongest level since late 2002. Read full story

Analysts said the Fed’s policy update later on Wednesday would determine the rand’s direction into the end of the week.

“A 50bps hike should see the rand firm from current levels, while 75bps could see further weakness,” Andre Cilliers, Currency Strategist at TreasuryONE said.

Analysts had largely been predicting that the Fed would hike by 50 basis points at the conclusion of its meeting on Wednesday before last week’s higher-than-expected US  inflation data for May. But markets are now pricing in an outsized 75 basis point interest rate hike following the inflation figures. Read full story

The government’s benchmark 2030 bond firmed slightly in early deals, with the yield down 3.5 basis points to 10.355%.