Rand firms 10c to dollar as Reserve Bank keep rates unchanged
The rand firmed 10c against the dollar in afternoon trade on Thursday after the Reserve Bank kept interest rates unchanged.
Citing event risks, particularly those of a political nature, the Bank decided to keep rates unchanged, despite the monetary policy committee (MPC) being split on the decision, with three members favouring a cut and three wishing to keep rates unchanged.
The market expected a reduction of 25 basis points in the repo rate.
The rand remains a key upside risk to the inflation outlook, governor Lesetja Kganyago said.
"Furthermore, some of the event risks, particularly those of a political nature, were now more imminent but with no greater degree of clarity regarding the outcome," he said.
The prospect of a further ratings downgrade persisted, particularly given the increased fiscal challenges and political uncertainty, he said. "However, the narrower current-account deficit and the global environment remain supportive of the rand."
The rand was at R13.3585 to the dollar when Kganyago started his address, but firmed to R13.30 after he made the decision known, before gaining further in the next few minutes.
At 3.29pm the rand was at R13.262 to the dollar from R13.3235, at R15.7952 to the euro from R15.8481 and at R17.9055 to the pound from R17.9812.
The euro was at $1.1911 from $1.1896.
While still facing economic headwinds, SA’s housing market would have benefited if the Bank had decided on another cut, said Pam Golding CEO Andrew Golding said.
"Another reduction would have further reinforced a positive outlook, thereby helping boost increased activity and growth in the residential property market," he said.
Morning trade in the rand was focused on the US Federal Reserve’s announcement on Wednesday that it would start the process of winding down its $4.5-trillion balance sheet as soon as October, while also keeping interest rates unchanged. The Fed also left the possibility open for one more interest-rate increase before the end of 2017.