The South African rand strengthened to around 16.4 per US dollar, recovering from a near one-month low of 16.5 hit on Wednesday, as investors awaited Thursday's South African Reserve Bank (SARB) policy decision. The rebound followed stronger-than-expected inflation data, which boosted expectations of a larger rate hike. Annual inflation accelerated to 5.0% in June, the highest in two years, from 4.5% in May and above forecasts of 4.7%, driven mainly by transport and housing costs. Core inflation also rose to 4.1%, its highest level since September 2024. Markets still expect the SARB to raise its benchmark rate by at least 25 basis points to 7.25%, but the latest data have revived expectations of a 50bp move. The central bank considered such an increase in May, and with inflation now above the revised 4.0% upper bound of its 3% ±1 percentage point target range, the case for a larger hike has strengthened.