Illustration photo of South African rand

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

JOHANNESBURG (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 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)

2019-05-24 09:48:28

© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.