(Adds latest prices, analyst comments)
JOHANNESBURG, April 28 (Reuters) - South Africa's rand firmed on Wednesday as the global hunt for high yields trumped caution ahead of the U.S. Federal Reserve's latest policy decision which will likely set the tone for global currency trading in the coming sessions.
At 1500 GMT, the rand ZAR=D3 was 0.61% firmer at 14.2875 per dollar, recovering from a slide to a two-week low in the previous session in mixed trade with investors avoiding big bets.
With local markets closed on Tuesday for a national holiday, rand volumes were thin overnight, keeping the currency within a recent range tilted to the upside as investors worried about rate hikes by the Fed.
But the high yield, or carry, available on the rand assets, has seen the currency outperform its emerging market peers.
The Fed is widely expected to maintain its policy stance and likely to repeat its dovish message, but some analysts say signs of rising inflation could nudge the central bank to abandon its rhetoric that a policy tightening was still a long way off.
"With the FOMC rate decision tonight I can't imagine we will see any kind of fireworks today," said chief trader at Standard Bank (JO: SBKJ ), Warrick Butler, in a note.
"The market may try to price in some new hawkish point from (Fed chairman) Powell, but if that happens it will be a remarkable surprise given that nothing has changed globally or in the U.S. since we last heard from him."
Shares on the Johannesburg Stock Exchange (JSE) continued to scale up for a third consecutive trading day as global optimism around economic recovery continued to pump investors with confidence.
The benchmark all-share index .JALSH closed up 0.25% to 67,740 points while the blue-chip index of top 40 companies .JTOPI ended up 0.2% to 61,839 points.
Banks, often said to be the strongest indicator of local economic recovery, led the gain on Wednesday with the bank index .JBANK up 2.27%.
Bonds were weaker, with the yield on the benchmark 2030 government issue ZAR2030= up 6.5 basis points at 9.22%.
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