Johannesburg - The rand rose to its strongest in a week against the dollar on Thursday after the central bank kept interest rates on hold but gave the market enough hawkish comments to suggest a hike is coming soon.

The rand gained 0.4 percent to 10.3245 to the dollar at 17:56 SA time, off a 10.3685 close in New York on Wednesday.

The unit strengthened over 2 cents after Reserve Bank Governor Gill Marcus kept the repo rate at 5.5 percent but said two members of the rate-setting committee had wanted an increase.

“It was like the market wanted to hear anything remotely hawkish, especially after CPI yesterday. The positioning was there, and that comment on two members was the trigger,” one London-based analyst said.

April inflation data came out slightly above expectations and above the central bank's 3-6 percent target range, leaving some investors thinking the bank would raise rates by at least 25 basis points, after a surprise hike to stave off inflationary pressures in January.

The rand has recovered since then, hitting the year's strongest level last week.

Reserve Bank Governor Gill Marcus said the bank remained in a monetary tightening cycle but made clear risks to economic growth were increasingly to the downside.

She forecast growth in the first three months of this year to be the lowest quarterly expansion since a 2009 recession.

Yields on government bonds fell to a one week low of 8.005 percent on the benchmark 2026 issue and to 6.54 percent on the 2015 note as bonds enjoyed a relief rally from the bank's unchanged rates decision.

Dealers said there were some expectations that the bank would hike rates by 25 basis points, resulting in short covering when the hike did not happen. - Reuters