Rand Slightly Weaker After SARB Pauses Interest-Rate Cycle

The rand reversed its initial losses, which took USD/ZAR below the 17.8 figure, as the SARB kept interest rates on hold in what had been expected to be a close decision between a hold and a 25bp hike. USD/ZAR is now pulling back from its post-SARB peak and sits at 17.9113, gradually reducing its reaction move.

• South Africa's FRA curve adjusted lower but then unwound reaction moves. The contracts still generally sit lower as we type, holding onto losses registered earlier in the day.
• The SARB voted 3-2 to stand pat on rates rather than raise them by 25bp. Consensus was looking for a 25bp hike, although most sell-side desks caveated their calls and suggested that the arguments were finely balanced. The market took a more dovish stance, pricing only a very modest chance of a hike.
• The central bank said that risks to the inflation outlook are assessed to the upside, although Deputy Governor Naidoo later noted that inflation appears to be on a glidepath to the +4.5% target mid-point. The SARB believe that "we have turned the corner," but stand ready to resume tightening if these risks materialise.