South African rand holds firm after first rate cut in four years

By Tannur Anders and Bhargav Acharya

JOHANNESBURG, Sept 19 (Reuters) - The South African rand held onto early gains on Thursday following the South African Reserve Bank's (SARB) decision to cut interest rates for the first time in over four years, after a super-sized interest rate cut by the U.S. Federal Reserve.

At 1600 GMT, the rand traded at 17.4775 against the dollar , about 0.4% stronger than its previous close.

The U.S. currency was down 0.3% against a basket of peers.

The SARB joined the easing club with a 25 basis point (bps) rate cut, as predicted by economists polled by Reuters, but struck a measured tone, saying although inflation had fallen faster than expected there were still risks to the outlook.

Data showed on Wednesday that South Africa's annual inflation rate fell to 4.4% last month, lowest since April 2021 and just below the mid-point of the central bank's 3% to 6% target range.

"The rand traded stronger for the seventh consecutive day, trading as low as 17.39 at one point, but ran out of steam in the latter part of the day," said Wichard Cilliers, head of market risk at TreasuryONE, following the rate decision.

The rand's 17.39 per dollar level on Thursday was its strongest since February 2023.

The Fed cut interest rates by 50 bps on Wednesday, weakening the dollar and boosting the risk-sensitive rand.

On the Johannesburg Stock Exchange, the Top-40 index closed about 1.3% higher.

South Africa's benchmark 2030 government bond was up marginally, with the yield down 1 basis point at 8.84%. (Editing by Alexander Winning, Barbara Lewis and Jane Merriman)