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JOHANNESBURG (Reuters) - South Africa's rand strengthened against the dollar in early trade, as investors waited cautiously for a U.S. Federal Reserve interest rate decision later on Wednesday.

South Africa’s rand stronger before U.S. Fed meeting

JOHANNESBURG (Reuters) – South Africa’s rand strengthened against the dollar in early trade, as investors waited cautiously for a U.S. Federal Reserve interest rate decision later on Wednesday.

South African bank notes featuring images of former South African President Nelson Mandela (R) are displayed next to the American dollar notes in this photo illustration in Johannesburg August 13 2014. REUTERS/Siphiwe Sibeko

By 0649 GMT, the rand was 0.45 percent stronger at 12.5950 per dollar compared to a close of 12.6525 on Tuesday in New York.

The U.S Federal Reserve is holding its policy meeting ending on Wednesday and will decide whether to hold or hike interest rates.

“The markets anticipate a hawkish Fed, driving gold prices and emerging markets lower,” Peregrine analysts said in a note.

As central banks in some advanced economies move away from the era of historically low interest rates, emerging markets that have wide current account deficits to fund are expected to be hit the hardest as the supply of liquidity tightens globally.

In fixed income, the yield for the benchmark government bond was up 6 basis points to 8.25 percent.

Stocks were set to open lower at 0700 GMT, with the JSE securities exchange’s Top-40 futures index down 0.25 percent.

Reporting by Patricia Aruo

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