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South Africa: Forex Reserves Dip
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Business Day (Johannesburg)
12 May 2008
Posted to the web 12 May 2008
Thabang Mokopanele
Johannesburg
SA's gold and foreign exchange reserves fell 0,3% to $34,3bn last month, the first decline in nearly two years, as the price of bullion dropped.
Net reserves, which exclude foreign loans, dipped $151m to $32,97bn, the Reserve Bank said last week. The foreign exchange component of reserves edged up 0,5% in the month, helped by a firmer rand, but the rise was meagre given that the unit appreciated to R7,595 to the dollar from R8,100.
"The slight decline in reserves perhaps signals a less rigid approach by the Bank in its foreign exchange operations," Nedbank economist Johannes Khosa said.
The Bank has steadily built up its reserves, which help cushion the economy against external shocks, after bringing a longstanding negative position into balance in 2004.
But they still lag behind other emerging markets, and may remain under pressure this year due to waning global appetite for risk, which has eroded demand for local assets.
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"Financial markets are gradually recovering from the effects of the US subprime crisis. However, investors will remain cautious. Demand for South African assets, in particular, will continue to be affected by concerns relating to the outlook for the local economy," Khosa said.
The value of gold reserves dropped 7% to $3,48bn, reflecting a fall in bullion prices.
Absa Capital's Monale Ratsoma said: "We expect the Bank's accumulation activity to continue at current rand levels. The turnaround in portfolio flows in the second quarter, thanks to calmer global financial markets, bodes well."
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