Rand climbs to three-week high as interest rates remain on hold
The rand extended gains on Thursday afternoon as the Reserve Bank opted to keep the repo rate unchanged at 6.5%, in line with market expectations.
Shortly after the announcement, the rand had firmed 0.9% to R14.6505/$, a level it has not seen since October 30. It had strengthened 0.71% to R16.248/€ and 0.54% to R18.993/£.
The R2030 government bond was stronger, with the yield falling 1.5 basis points to 9.05%. Bond yields move inversely to bond prices.
Analysts had warned that the Bank would likely avoid a cut considering the risks to the rand, including the possibility of a credit-ratings downgrade from Moody’s Investors Service and global risk factors.
Lowering the interest rate would likely weaken the rand, as it makes SA bonds less attractive to investors on the hunt for higher-yielding returns.
The latest decision by the monetary policy committee (MPC) follows a weak inflation report on Wednesday, which raised questions over the possibility of a cut.
Source: businesslive.co.za