South African rand holds gains after SARB focuses on lower inflation target

JOHANNESBURG, May 30 (Reuters) - The South African rand held most of the previous day's gains in early trade on Friday, after the central bank stressed its strong preference for a lower inflation target at a monetary policy announcement.
The South African Reserve Bank (SARB) presented detailed modelling of the impact of a 3% inflation target, compared to the 4.5% level it aims for at the midpoint of its current 3% to 6% target range.
The SARB, which resumed interest rate cuts on Thursday after a pause in March, added that its Monetary Policy Committee felt a 3% target was "more attractive" and said it would continue to consider scenarios based on that target at future rate meetings.
"Investors focused on the implications of a lower target, namely lower inflation, reduced interest rates, bond market inflows, and stronger long-term growth, which further support the rand," ETM Analytics said.
Other factors that point to more rand resilience include a solid trade surplus, tight credit cycle and signs of prudence in government finances, the research firm added in a note.
At 0650 GMT, the rand traded at 17.8425 against the dollar , about 0.1% weaker than Thursday's closing level.
Weighing against the rand was a stronger dollar on global markets .
The benchmark 2035 government bond was stronger in early deals, as the yield fell 4 basis points to 10.13%.

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