The South African rand steadied against the dollar in early trade on Wednesday, as investors awaited the U.S. Federal Reserve's policy announcement later in the day.

At 0615 GMT, the rand traded at 15.7650 against the dollar, largely unchanged from its previous close.

"Markets are likely to remain cautious today and liquidity limited as they await the outcome of the FOMC tonight," Nedbank analyst said in a note.

Investors expect the Fed to hike rates by half a percentage point on Wednesday, and to detail plans to reduce its $8.9 trillion balance sheet. The U.S. central bank raised its policy interest rate by 25 basis points in March.

Higher rates in developed markets tend to drain capital from riskier emerging markets such as South Africa, weighing on their currencies.

(Reporting by Olivia Kumwenda-Mtambo; Editing by Vinay Dwivedi)