* Rand shrugs off domestic woes
* Focus on Fed's policy decision
* Stocks fall, led by MTN (Updates levels, add quotes)
JOHANNESBURG, June 14 (Reuters) - South Africa's rand gained on Wednesday as the dollar fell after the United States reported weaker-than-expected inflation and retail sales data. Stocks ended lower as mobile phone operator MTN slid to a four-month low.
At 1530 GMT, the rand traded 1.25 percent higher at 12.6000 per dollar, after closing at 12.7600 overnight in New York, bringing weekly gains to around 2.5 percent.
The unexpected decline in monthly U.S. consumer prices and retail sales suggested inflation pressures are moderating, which may delay interest rate increases by the Federal Reserve.
The prospect of slower-than-expected U.S. rate increases boosts demand for emerging-market assets, which offer higher returns but carry more risk.
The Fed is scheduled to announce its latest rate decision at 2 p.m. eastern time (1800 GMT) on Wednesday.
The rand held on to gains despite continued fallout triggered by credit ratings downgrades.
A survey showed on Wednesday that South African business confidence fell deeper into negative territory in the second quarter, to a level not seen since the 2009 recession, as business activity remained week and political risk persisted .
"This sets the economy up for another year of negative growth in gross domestic fixed investment, which will serve as another blow to policymakers' hope to boost the country’s falling potential growth rate," said Jeffrey Schultz, an economist at BNP Paribas Securities South Africa.
Government bonds also gained, with the yield for the benchmark instrument due in 2026 dropping 3.5 basis points to 8.405 percent.
On the stock market, the benchmark Top-40 index was down 0.4 percent at 45,085 points. The broader All-share index was down 0.3 percent at 51,489 points.
Shares in MTNw were down 2 percent to 111.60 rand, their lowest in four months. MTN counts crude-oil producers Nigeria and Iran among its three largest markets, and oil price fell after reports showed global supply was growing.
Diversified mining companies Anglo American and BHP Billiton were the biggest losers among the blue chips, as copper prices fell before the Fed's decision.
Anglo shares were down 2.9 percent to 171.71 rand and BHP slid 2.2 percent to 191.04 rand.
Gold mining companies were among the gainers as the bullion price rose 1 percent after the U.S. inflation data.
The JSE's gold index was up 1 percent at 1,337.40 points. (Reporting by Olivia Kumwenda-Mtambo and TJ Strydom, editing by Larry King)