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Johannesburg - The rand gained nearly 1% against the dollar Thursday, buoyed by comments from the Reserve Bank which made clear it would soon hike interest rates to fight inflation.
Government bonds rallied and yields fell, with analysts citing relief in the market that the Reserve Bank had not tightened rates immediately as some players had been pricing in.
By 16:49 GMT the rand was changing hands at R10.6050/$, up 0.95% from Wednesday's close in New York.
The currency earlier touched a session high of 10.5615, its strongest since Jan. 2 according to Thomson Reuters data, after Governor Gill Marcus said the bank's monetary policy committee was in a tightening cycle.
"There will be interest rates increases," she told a press conference.
But the Reserve Bank's decision to hold off tightening for now boosted government bonds, with the yield on the 2026 benchmark issue ending the day down 7.5 basis points at 8.345%.
The 2015 note at the shorter end of the yield curve fell 5.5 basis points to 6.8%.
Analysts polled by Reuters this week correctly predicted rates would stay on hold on Thursday, but several saw another hike in the second quarter of the year, adding to an unexpected 50 basis point increase at the first policy meeting of the year in Janaury.
"The rand remains vulnerable and further weakness could raise the pass-through effects of the weaker currency, which have remained contained so far," Nedbank said in a note after Marcus's speech.
"We believe that the next interest rates increase is likely to be at the May or July meeting, depending on the trajectory of the rand."
Government bonds rallied and yields fell, with analysts citing relief in the market that the Reserve Bank had not tightened rates immediately as some players had been pricing in.
By 16:49 GMT the rand was changing hands at R10.6050/$, up 0.95% from Wednesday's close in New York.
The currency earlier touched a session high of 10.5615, its strongest since Jan. 2 according to Thomson Reuters data, after Governor Gill Marcus said the bank's monetary policy committee was in a tightening cycle.
"There will be interest rates increases," she told a press conference.
But the Reserve Bank's decision to hold off tightening for now boosted government bonds, with the yield on the 2026 benchmark issue ending the day down 7.5 basis points at 8.345%.
The 2015 note at the shorter end of the yield curve fell 5.5 basis points to 6.8%.
Analysts polled by Reuters this week correctly predicted rates would stay on hold on Thursday, but several saw another hike in the second quarter of the year, adding to an unexpected 50 basis point increase at the first policy meeting of the year in Janaury.
"The rand remains vulnerable and further weakness could raise the pass-through effects of the weaker currency, which have remained contained so far," Nedbank said in a note after Marcus's speech.
"We believe that the next interest rates increase is likely to be at the May or July meeting, depending on the trajectory of the rand."
