South African rand hitting its best level in years

The rand extended its recent strong gains against the dollar on Thursday while traders awaited the South African Reserve Bank’s first rate-setting meeting this year for signals on its monetary policy posture.

At 0724 GMT, the rand traded at 15.7050 against the dollar, roughly up 0.5% on Wednesday’s close and hovering around its strongest level in 3-1/2 years.

The currency has gained more than 5% against the dollar so far this year.

The greenback was flat against a basket of currencies while gold, a major South African export, stretched its blistering rally to hit a record just shy of $5,600 an ounce, as investors sought safety amid geopolitical and economic uncertainties.

Eighteen of 26 analysts polled by Reuters expect the SARB to leave its main lending rate unchanged at its meeting at around 1300 GMT, while eight predicted a 25-basis-point rate cut to 6.50%.

“If the market was not convinced that the SARB would cut rates today, it should be this morning,” said ETM Analytics in a note, adding that low inflation outcomes and a strong local currency have opened the door for a January cut.

Statistics South Africa will publish December domestic producer inflation figures at 0930 GMT, with analysts polled by Reuters expecting it to have remained steady at 2.9%.

South Africa’s benchmark 2035 government bond was stronger in early deals, as the yield fell 2 basis points to 8.04%.

• Reporting by Sfundo Parakozov.