South Africa’s rand steady in early trade, focus on rates decision

• by Reuters
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South African Rand coins are seen in this photo illustration taken September 9, 2015. REUTERS/Mike Hutchings

JOHANNESBURG (Reuters) – South Africa’s rand steadied against the dollar in early trade on Thursday, with investors cautious ahead of the central bank’s interest rates decision later in the day.

At 0635 GMT, the rand traded at 13.9225 per dollar, not far from its New York close of 13.9150 on Tuesday.

Africa’s most industrialised economy is in a recession, upping pressure on the central bank to cut rates to support growth.

The bank said at its last meeting in September it was more concerned about the deteriorating inflation outlook and that rates were already accommodative.

That has fed expectations of a rate increase at its policy meeting on Thursday.

Sixteen out of the 26 economists polled by Reuters last week predicted the Reserve Bank would keep its repo rate at 6.50 percent, while the rest forecast a 25 basis-point hike, suggesting it is a very close call.

“All risks considered, the hawks are likely to argue for an increase in interest rates to avoid hiking under pressure at a later stage should inflation surprise to the upside over the forecast period,” Rand Merchant Bank analyst Mpho Tsebe said in a note.

“There is no doubt that the rate call is difficult to predict and that the decision could go either way. With such a closely split view, it is uncertain what the impact of a rate hike or a hold will have on the rand.”

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