South African rand rises as dollar falls before Fed rate decision

JOHANNESBURG (Reuters) - South Africa's rand firmed on Wednesday, as expectations that the U.S. Federal Reserve will signal a slower pace of monetary tightening kept the dollar under pressure.

Stocks closed slightly higher, snapping a three-day losing streak stemming from worries over global economic growth.

At 1510 GMT, the rand traded at 14.1325 per dollar, 1.64 percent stronger than its previous close, having hit a session high of 14.1100.

With little domestic data and tepid market activity, the South African currency is expected to track global trends this week.

The dollar index was down 0.51 percent at 96.612, as it extended losses into a second day. Speculation ahead of the Fed's meeting which ends later in the day and global growth anxiety have pushed U.S. bond yields down and added to pressure on the dollar. The rand's gains on Tuesday were also linked to dollar weakness, as traders wagered that the Fed would hit the pause button on its tightening cycle after an expected rate hike this week. [nL8N1YN3WA] [nL3N1YO1NG]

"Sentiment and politics will continue to be the key drivers," said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions.

Government bonds also firmed, with the yield on the benchmark instrument due in 2026 down 6.5 basis points at 9.05 percent.

On the bourse, the JSE Top-40 index ended 0.6 higher at 45,512 and the broader All-share index was up by the same amount at 51,551.

Taste Holdings slumped 6.25 percent after the domestic franchise holder of Starbucks and Domino's Pizza said it would launch a 132 million rand ($9.34 million)rights issue to support operations.

(Reporting by Alexander Winning and Tiisetso Motsoeneng; Editing by Kirsten Donovan)