JOHANNESBURG, July 26 Reuters The South African rand slumped on Wednesday, as analysts said the outcome of a U.S. Federal Reserve policy meeting later in the day could leave it open to losses after strong gains this month.

At 1330 GMT, the rand traded at 17.7000 against the dollar , more than 0.8 weaker than its previous close, after earlier being down almost 1 against the greenback.

There is quite a lot of caution in the market because of the Fed rate decision tonight, said Greg Davies, head of wealth at asset manager Cratos Capital.

Rand Merchant Bank said in a morning briefing that after recent gains the rand is stretched too far. Referring to the Fed39;s interest rate announcement later on Wednesday, it said event risk is huge tonight and that a sharp fall in the rand should not be ruled out.

Markets are betting on a 25basispoint hike from the Fed on Wednesday, but they are split on the odds of another later in the year. If the Fed39;s language is hawkish it could boost the dollar and leave emerging market currencies like the rand exposed.

The rand has gained more than 6 against the greenback so far in July, helped by dollar weakness in the first half of the month, a commitment from Chinese policymakers to support their economy, and foreign buying of South African government bonds.

Kevin Lings, an economist at asset manager Stanlib, linked the foreign bondbuying to a decline in South African inflation and a decision by the Reserve Bank last week to leave its…