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Johannesburg - The rand regained its poise against the dollar on Friday after briefly weakening the day before, following a rate cut the market had largely anticipated.
The Reserve Bank cut its repo rate by 50 basis points to a historial low of 5.5% on Thursday, saying the outlook for domestic inflation had improved while the economy was still struggling and the rand remained strong.
Reserve Bank Governor Gill Marcus said the scope for monetary easing was limited, but also added that Thursday's reduction may not be the bottom of the interest rate cutting cycle.
The rand was not overly fazed by the move, already priced in by the market, and traded at R6.9560 by 08:40 on Friday, a gain of 0.24% over Thursday's close at R6.9725.
Government bonds rallied - and yields retreated - on the back of a dovish statement from Marcus which left the door open for more interest rate cuts next year to help the struggling economy.
The yield on the benchmark 2015 was down 7 basis points at 6.945% on Friday while that for the longer dated 2026 bond fell 13 basis points to 7.975%.
"It's a continuation of yesterday's cut. Basically Gill Marcus's outlook is still pretty dovish ... there's certainly room for more rate cuts and the market is firmer as a result," a bond trader in Johanensburg said.
"The big move on the day is the 186's which have rallied from overnight levels. What we're seeing is buyers in the long end of the curve, guys are looking to pick up 186's. The hunt for yields is on again."
"Yield attraction although diminished still exists and so long as the currency depreciative policies implemented abroad remain a feature of the global currency market, the relatively stable monetary and fiscal policies of South Africa should ensure that the rand at the very least remains resilient," Tradition Analytics said in a note.
Dollar/rand had technically turned lower and could test levels back towards R6.9300 through the course of the day, the research group said.
"However, to turn rand bullish over the next week or two, one would need to see a break below R6.9000 which would mean a break below trend line support," Tradition Analytics added.
The blue chip Top-40 December futures contract was up 0.21% ahead of the 09:00 start of trade on the JSE securities exchange.
The Reserve Bank cut its repo rate by 50 basis points to a historial low of 5.5% on Thursday, saying the outlook for domestic inflation had improved while the economy was still struggling and the rand remained strong.
Reserve Bank Governor Gill Marcus said the scope for monetary easing was limited, but also added that Thursday's reduction may not be the bottom of the interest rate cutting cycle.
The rand was not overly fazed by the move, already priced in by the market, and traded at R6.9560 by 08:40 on Friday, a gain of 0.24% over Thursday's close at R6.9725.
Government bonds rallied - and yields retreated - on the back of a dovish statement from Marcus which left the door open for more interest rate cuts next year to help the struggling economy.
The yield on the benchmark 2015 was down 7 basis points at 6.945% on Friday while that for the longer dated 2026 bond fell 13 basis points to 7.975%.
"It's a continuation of yesterday's cut. Basically Gill Marcus's outlook is still pretty dovish ... there's certainly room for more rate cuts and the market is firmer as a result," a bond trader in Johanensburg said.
"The big move on the day is the 186's which have rallied from overnight levels. What we're seeing is buyers in the long end of the curve, guys are looking to pick up 186's. The hunt for yields is on again."
"Yield attraction although diminished still exists and so long as the currency depreciative policies implemented abroad remain a feature of the global currency market, the relatively stable monetary and fiscal policies of South Africa should ensure that the rand at the very least remains resilient," Tradition Analytics said in a note.
Dollar/rand had technically turned lower and could test levels back towards R6.9300 through the course of the day, the research group said.
"However, to turn rand bullish over the next week or two, one would need to see a break below R6.9000 which would mean a break below trend line support," Tradition Analytics added.
The blue chip Top-40 December futures contract was up 0.21% ahead of the 09:00 start of trade on the JSE securities exchange.
