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Cape Town - The rand reacted positively to the news that the Bank of England kept interest rates unchanged, much against market expectation.
Most economists had expected the BoE to cut its main interest rate from the record low of 0.5% to help prop up the economy rattled by Britain's decision to leave the European Union.
Wichard Cilliers, chief currency dealer at TreasuryOne said the local unit traded slightly higher on the back of the news.
By 13:11 the rand was trading at R14.32/$ from R14.45 when trade opened on Thursday.
The market priced in a 25 basis point cut in rates following the economic fallout from Brexit last month.
Cilliers said the post-Brexit and post non-farm payroll rally has dissipated as risk assets started stalling.
"The rand failed to break 14.30 yesterday, and Asian shares have struggled to make it past their new highs.
The rand, along with risk assets, could now possibly see a move to R14.20/$. Against the pound and euro the local unit was trading at R19.12 and R15.89 respectively.
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Bloomberg reports that the pound climbed on the hold move even after Governor Mark Carney’s pledged to take whatever monetary action needed to support the UK economy from the fallout of Brexit.
Sterling gained versus all of its 16 major peers as minutes of the BoE meeting showed eight out of nine Monetary Policy Committee members voted to keep the official rate at a record-low 0.5%, where it’s been since March 2009.
Officials maintained the central bank’s asset-purchase target at £375bn.
The pound rose 1.6% to $1.3357 as of 12:18 London time, having earlier touched $1.3475, the highest since June 30. Sterling strengthened 1% to 83.48 pence per euro.
The decision to hold rates helped extend the pound’s rally from a 31-year low versus the dollar. The currency gained this week as Theresa May prepared to take over as prime minister, ending a period of political uncertainty that has lasted since the June 23 referendum. It’s still 10% lower since the nation opted for Brexit.
This was the BoE's first rate decision since the UK’s historic vote to leave the EU. Carney said shortly after the referendum that easing would probably be needed over the summer, which left investors to speculate on the timing of the decision. The BOE’s next meeting is on August 3 to 4.
By 14:14 SA time the rand was trading another 10c firmer at R14.22/$.
* This article has been updated with adds from Bloomberg.
