South Africa's rand rallies after central bank cuts rates

JOHANNESBURG (Reuters) - South Africa's rand edged higher against the dollar in early Friday trade and bond yields fell after the central bank cut its main lending rate by 25 basis points on Thursday in a widely expected move to counter floundering economic growth.

At 0730 GMT the rand was 0.13% firmer at 13.8225 per dollar, after closing at 13.8400 in the previous session.

The South African Reserve Bank (SARB) cut rates by 25 basis points to 6.5% in a unanimous decision, its first easing since March 2018, although it struck a cautious tone suggesting future reductions to borrowing costs were not a foregone conclusion despite benign inflation.

"The rand managed to hold its own again this week, trading in a tight range. Continuous carry trade remains one of the most prominent reasons for the rand's resilience," Bianca Botes, Treasury Partner at Peregrine Treasury Solutions said in a note.

Government bonds were firmer, with the yield on the benchmark 2026 instrument down 1 basis point to 7.965%.

On the bourse, stocks rose more than 1%, led by food producer Pioneer Food Group after U.S.-based beverage and snack maker PepsiCo made a takeover offer of $1.7 billion.

Shares on Pioneer surged 28.80% to 99.95 rand after the announcement.

The benchmark JSE Top-40 Index firmed 1.02% at 52,263 points while the broader All-Share Index rose 1.03% to 58,470 points.

(Reporting by Nqobile Dludla; Editing by Angus MacSwan)