JOHANNESBURG: South Africa's rand edged higher against the dollar and bond yields ticked up on Thursday after the Reserve Bank kept interest rates on hold as expected.
But the dovish tone of the central bank's policy statement left some traders seeing some chance of a cut at the Bank's last meeting of the year in November.
The rand was at 8.3230 to the dollar at 1615 GMT, down 0.61 percent on the day but up from a low of 8.38 reached during Reserve Bank governor Gill Marcus's speech.
Benchmark government bond yields edged up after Marcus kept the repo rate steady at 5.0 percent, with the 3-year bond closing the day at 5.41 percent from 5.4 before the announcement, a gain of 1.5 basis points on the day.
The yield for the longer-dated 14-year issue crept higher to 7.525 percent from 7.51 percent before the rates announcement.
The Reserve Bank cut its 2012 growth forecast to 2.6 percent from the 2.7 percent predicted in July, saying Africa's biggest economy was expected to remain weak because of poor global growth and disruptions to mining output.
Inflation was expected to remain within the target range but the Bank saw the rand exchange rate as a potential risk particularly "in the event of an unsustainable widening of the current account deficit".
"The statement in general was a little bit more dovish than most market players anticipated and the curve steepened on the back of that," said Marten Banninga, head of bond trading at WWC Securities.
"I think trade will be (biased) towards an emphasis for a cut in the future."
The Reserve Bank said the rand had been underpinned to some extent by continued inflows to the debt market in the lead-up to South Africa's inclusion in the Citibank World Government Bond Index (WGBI) next month.
Non-resident purchases of South African bonds since the previous meeting of the MPC in July amounted to 12.1 billion rand and were expected to persist for some time.
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