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Johannesburg - The rand held on to the previous day's gains against the dollar on Friday, after the South African Reserve Bank (Sarb) left interest rates unchanged but indicated they would have to rise eventually.
At 08:37 the rand traded at R10.9670 per dollar, barely changed from Thursday's close at R10.9605 in New York.
Government bonds extended Thursday's advance, pushing the yield for the benchmark instrument due in 2026 down 7.5 basis points to 7.685%, its lowest in more than a year.
The rand's gains were partly a factor of improved investor appetite for riskier, but high yielding emerging markets, as interest rates in Japan and Europe look to stay low for longer, traders said.
"As long as the developed world keeps throwing money at the masses and is unconvincing in the growth story, the attraction of these high-yielding assets is likely to remain inflated," said Standard Bank trader Warrick Butler.
"The world does seem to be underweight EM assets in general."
READ: As it happened: Interest rates remain unchanged at 5.75%
Sarb's decision to keep the benchmark repo rate unchanged at 5.75% at its last policy meeting of 2014 could, however, weigh on the rand in the long run, amid expectations the Federal Reserve might start hiking rates soon.
"The slow pace of tightening in this cycle is not building up a large buffer against Fed rate hikes, nor is it helping enough to correct the imbalances on the current account," said Rand Merchant Bank currency analyst John Cairns.
The twin deficits on the budget and currency account have tended to make it more vulnerable than its peers during episodes of emerging market sell-offs.
ALSO READ: Sarb: Rates must go up at some point
At 08:37 the rand traded at R10.9670 per dollar, barely changed from Thursday's close at R10.9605 in New York.
Government bonds extended Thursday's advance, pushing the yield for the benchmark instrument due in 2026 down 7.5 basis points to 7.685%, its lowest in more than a year.
The rand's gains were partly a factor of improved investor appetite for riskier, but high yielding emerging markets, as interest rates in Japan and Europe look to stay low for longer, traders said.
"As long as the developed world keeps throwing money at the masses and is unconvincing in the growth story, the attraction of these high-yielding assets is likely to remain inflated," said Standard Bank trader Warrick Butler.
"The world does seem to be underweight EM assets in general."
READ: As it happened: Interest rates remain unchanged at 5.75%
Sarb's decision to keep the benchmark repo rate unchanged at 5.75% at its last policy meeting of 2014 could, however, weigh on the rand in the long run, amid expectations the Federal Reserve might start hiking rates soon.
"The slow pace of tightening in this cycle is not building up a large buffer against Fed rate hikes, nor is it helping enough to correct the imbalances on the current account," said Rand Merchant Bank currency analyst John Cairns.
The twin deficits on the budget and currency account have tended to make it more vulnerable than its peers during episodes of emerging market sell-offs.
ALSO READ: Sarb: Rates must go up at some point
