Rand in recent ranges before rate call

Published Nov 20, 2014

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Johannesburg - South Africa's rand and government bonds traded within recent ranges on Thursday with investors treading carefully before the central bank announces a decision on interest rates later in the day.

Most market players expect the Reserve Bank to keep rates steady, but some forecast a hike, citing rising core inflation, a weak rand exchange rate and the fact the Reserve Bank has announced a gradual monetary tightening cycle.

At 08:53 SA time, the local currency was at 11.0650 to the dollar, off a 11.0595 close in New York on Wednesday and within levels touched earlier in the week.

“Dollar/rand starts at 11.07, more or less where it was yesterday. Strong support is evident at 11.00, where the market has failed in each of the past two days, thanks largely to strong importer activity,” John Cairns, currency strategist at Rand Merchant Bank said in a market note.

The consensus of 30 economists polled by Reuters is that the central bank will keep the repo rate - at which it lends to commercial banks - at 5.75 percent, although the call was close.

Seventeen of the 30 analysts polled said they expected the bank would hold rates, while the remainder said it would hike by 25 basis points.

“Expect some rand gains this afternoon if our out-of-consensus call for a rate hike proves correct,” RMB's Cairns said.

Government bonds weakened slightly but also traded within the week's ranges. The yield on the benchmark 2026 bond nudged up 2 basis points to 7.835 percent. - Reuters

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