Johannesburg - The rand held steady against the dollar on Thursday as investors expected the European Central Bank to ease monetary policy to try to boost the European region's economy, a major trading partner for South Africa.

The rand traded at 10.7500 to the dollar at 08:16 SA time, slightly firmer, but not far off a 10.7650 close in New York on Wednesday.

The ECB will announce a decision on monetary policy at 13:45 SA time.

Investors expect a reduction in interest rates into negative territory, to try to force commercial banks to lend out cash they would otherwise deposit with the bank.

“The more the ECB eases, the better for South Africa and the better for the rand,” said John Cairns, forex strategist at Rand Merchant Bank.

The rand was expected to trade with little momentum until the decision, with dealers unsure of what the reaction might be as a lot has already been priced in by the market, traders said.

Yields on government bonds climbed three basis points to 8.365 percent on the 2026 benchmark issue, and rose 3.5 basis points to 6.685 percent on the 2015 note.

South Africa will release its Business Confidence Index for May at 11:30 SA time.

This is expected to reflect still subdued confidence in the economy, especially after weak economic data in the last week which showed Africa's most advanced economy is contracting, largely because of a damaging platinum sector strike. - Reuters