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Johannesburg - The rand was steady on Wednesday after
closing firmer against the dollar overnight, boosted in part by speculative
inflows into the bond market as some players bet on the slight chance the
Reserve Bank might cut interest rates on Thursday.
An overwhelming majority of economic analysts polled by Reuters last Friday expect the repo rate to stay on hold at 5.5%, after the last cut in November last year, as the Reserve Bank eyes rising inflation.
But some market participants think the central bank could
loosen policy further after a similar move by the European Central Bank and as
domestic economic growth remains sluggish.
Government bonds have edged higher as a partial result and
rose further on Wednesday, pushing the yield on the four year bond two basis
points lower to 6.35% while that for the longer-dated 2026 paper dipped half a
basis point to 8.165%.
The rand was at R7.8280 to the dollar, just 0.19% off its
New York close at R7.8130 on Tuesday when it rallied alongside other emerging
market currencies on optimism eurozone countries might be getting a handle on
their debt problems which have dampened risk appetite.
“We had some rand strength towards the end of the day
yesterday, I think some of it is as a result of a stronger bond market on a
belief of a higher probability of a rate cut and that's filtered into the rand,”
a trader in Johannesburg said, adding that news that beleaguered Italian Prime
Minister Silvio Berlusconi will resign also boosted sentiment.
“Equity markets have also done nicely so the rand is reacting to those positive sentiments all round,” the dealer said.
