South Africa's rand flat, market nervous ahead of Fed meeting

JOHANNESBURG (Reuters) - South Africa's rand held its ground above the psychological 10 mark against the dollar on Friday, but was unlikely to post significant gains due to nervous trade ahead of the U.S. Federal Reserve's meeting next week. Investors are still unsure whether the world's leading central bank will start to scale back its monthly asset purchases which have resulted in billions of dollars of cheap money flocking to emerging markets. The rand traded at 9.9715 against the greenback at 0636 GMT, only a breath away from Thursday's close at 9.9725. Government bonds were flat to weaker, with the 2026 benchmark unchanged at 8.195 percent, while the shorter-dated 2015 issue added 4.5 basis points to 6.11 percent. The local currency touched four-week highs earlier in the week, boosted by stronger-than-expected factory output data and an end to strikes in some sectors of Africa's biggest economy, which has been hit by labour unrest since late last year. But concerns about the withdrawal of investment from emerging markets once the Fed starts easing back on its monetary stimulus are weighing on high-yielding riskier currencies like the rand. "Having obsessed over the Fed for months, the markets experienced a relief rally of sorts this week but this was never sustainable ahead of next Wednesday's decision on tapering," said Rand Merchant Bank currency analyst John Cairns in a note. "Expect jumpy and nervous trade."