South Africa's rand recovers as lending rates seen steady for longer


JOHANNESBURG, May 24 (Reuters) - South Africa's rand firmed early on Friday, regaining some ground after dropping a day earlier, when the central bank kept lending rates unchanged in a decision that divided policymakers.

At 0630 GMT the rand ZAR=D3 was 0.48% firmer at 14.4200 per dollar compared to a close of 14.4900 overnight in New York.

The Reserve Bank's five-member policy committee voted 3-2 to keep rates steady at 6.75%, saying that while inflation and inflation expectations were close to the middle of the bank's 3% to 6% target range, they had not yet settled there.

"A mixed voting decision often signals an oncoming change in policy. We believe that inflation is likely to be slightly higher than the MPC expects as the impact of the rand and administered prices could be higher than currently anticipated," analysts at Nedbank said.

Despite moderating inflation, the rand and South African bonds continue to offer a relatively healthy yield return.

Bonds were also firmer on Friday, with the yield on the benchmark paper due in 2026 down 4 basis points to 8.34%.

(Reporting by Mfuneko Toyana; editing by John Stonestreet)

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