South African rand weakens against dollar with Fed in focus

(Reuters) -South Africa's rand weakened on Thursday, as the U.S. dollar held near recent peaks after traders continued to bet that the U.S. Federal Reserve will be aggressive next week in its battle to curb inflation.

At 1530 GMT, the rand traded at 17.5500 against the dollar, 0.4% weaker than its previous close.

The U.S. dollar index, which measures the greenback against a basket of currencies, was up 0.06% at 109.67, not far off its two-decade peak of 110.79.

Economists at ETM Analytics said in a research note that the Fed will likely remain extremely aggressive until data shows a few consecutive months of falling core inflation and signs of a loosening labour market.

Emerging-market currencies as a result, will struggle for traction, with the rand's value against the dollar poised to test recent highs around 17.5500 in the sessions ahead, they added.

Stocks on the Johannesburg Stock Exchange fell, mirroring similar moves in the Wall Street and other equity markets as investors prepare for an aggressive interest rate hike from the Fed next week.

Overall on the stock market, the Top-40 index ended down 0.64% while the broader all-share closed 0.58% lower.

The government's benchmark 2030 bond was up, with the yield down 2.5 basis points at 10.295%.

(Reporting by Anait Miridzhanian in Johannesburg and Bhargav Acharya in Bengaluru; Editing by Christopher Cushing)