World Markets

South Africa's rand edges up after surprise rate cut

Credit: REUTERS/PHILIMON BULAWAYO

South Africa's rand rose against the dollar early on Friday, a day after the central bank unexpectedly cut rates in an attempt to boost faltering economic growth.

JOHANNESBURG, Jan 17 (Reuters) - South Africa's rand rose against the dollar early on Friday, a day after the central bank unexpectedly cut rates in an attempt to boost faltering economic growth.

The South African Reserve Bank (SARB) lowered its main lending rate by 25 basis points to 6.25% in a unanimous decision on Thursday, as it lowered its inflation forecasts significantly.

The majority of analysts polled by Reuters had expected no change in rates because of risks associated with a February budget speech and a scheduled review of the country's last investment-grade credit rating by Moody's in March.

The central bank painted a grim picture on the outlook for economic growth, lowering its predictions for this year and next to 1.2% and 1.6% respectively.

At 0713 GMT, the rand ZAR=D3 traded at 14.3720 per dollar, 0.25% firmer than its previous close.

"The cut was not expected for the most part," said Warrick Butler, executive for rand and emerging market spot trading at Standard Bank.

"Lack of any major move in the rand suggests that either positioning is very light or some of the offshore investors are already hedged. Of course, the continued bias towards emerging market investment also helps."

In fixed income, yield on the benchmark government bond ZAR186= was down 3 basis points to 8.16%.

(Reporting by Olivia Kumwenda-Mtambo; Editing by Subhranshu Sahu)

((Olivia.Kumwenda@thomsonreuters.com; +27 11 595 2817; Reuters Messaging: olivia.kumwenda.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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