Rate cuts will not lift the rand, RMB's currency strategist John Cairns said on Thursday.

"Economic theory is clear - higher rates help the local currency and historical evidence is very supportive of this," Cairns said.

In the present environment there was an assumption that markets would reward those countries targetting growth.

"But I've seen little evidence of that," he said. "Those countries who have embarked on rate cuts have seen their currencies weakening."

Cairns' comments were in contrast to Investment Solutions economist Chris Hart, quoted in Business Report as saying: "Emerging market currencies do better on rate cuts because foreigners investing in emerging markets are attracted by growth prospects rather than yield."

Hart then pointed to the experience in 2002, when the rand firmed after the rate cutting cycle started, followed by rand weakness when the rate rising cycle commenced in June 2006.

Cairns, however, pointed out that this causality was wrong.

"Yes, the rand appreciated from 2002 to 2004 -- and that allowed rates to come down aggressively," Cairns said.

He said he agreed that slight rate cuts were not going to damage the rand. "But that is very different from saying that rate cuts will help the rand."

Comments that rate cuts may lift the rand were even dangerous, Cairns added.

"Economics doesn't work that way -- it's about trade-offs. If you lower your rates then your currency becomes vulnerable.

"The SA Reserve Bank needs to find a balance," Cairns said.

"It needs to cut rates without exposing the rand."

If rates were cut aggressively in the present environment and domestic demand was spurred on by this, then South Africa's current account could worsen, he said.