A South African one rand coin sits on South African rand banknotes in this arranged photograph in Pretoria, South Africa, on Wednesday, Aug. 14, 2019. The rand ended a tumultuous week on a positive note, gaining against the dollar for a second day and heading for its first weekly advance in four as technical indicators suggested recent declines are overdone. Photographer: Waldo Swiegers/Bloomberg via Getty Images

JOHANNESBURG, July 12 (Reuters) – The South African rand extended its gains in early trade on Friday, as a surprisingly soft U.S. inflation data spurred bets the Federal Reserve will cut interest rates in September.

Like most emerging market currencies, the rand often takes cues from U.S. economic data in addition to local factors.

At 0701 GMT, the rand traded at 17.98 against the dollar, about 0.2% stronger than its previous close.

Data on Thursday showed that U.S. consumer prices unexpectedly fell and the annual increase was the smallest in a year.

“This is important for the rand as monetary easing in the developed world will effectively inject fresh liquidity into global markets,” said Danny Greeff, co-head of Africa at ETM Analytics, on Thursday.

“Improved risk appetite is thus anticipated into the end of the year,” Greeff added.

U.S. inflation has been improving in recent months, and earlier this week Fed Chair Jerome Powell said that “more good data would strengthen” the case for central bank interest rate cuts.

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South Africa’s benchmark 2030 government bond was slightly weaker in early deals, with the yield up 1.5 basis points at 9.585%.

(Reporting by Tannur Anders; Editing by Sherry Jacob-Phillips)