Mariam Isa
9 November 2009
Johannesburg — SA's net gold and foreign exchange reserves jumped 2,3% to 38,8bn last month, more than expected, as gold prices and the value of the Reserve Bank's foreign currency holdings climbed.
Gross reserves, which include foreign loans and deposits, rose 1,7% to 39,8bn, official data showed on Friday.
Opinion was divided on the reasons for a 1,4% increase in foreign exchange reserves, which boosted them to 35,6bn.
Some analysts said it showed that the Bank had finally stepped up the pace of its foreign exchange purchases to curb gains in the rand, which rallied to a 14-month peak at R7,29/ during the month.
Others said the sharp rise simply reflected valuation adjustments stemming from gains in the euro and pound against the dollar.
"There remains little evidence of significant intervention by the Bank in October, in our view," Absa Capital said in a research note. "We believe the Bank is unlikely to engage in significant accumulation activity in the medium-term."
But Rand Merchant Bank (RMB) said the figures showed that the Bank had bought about 470m on the foreign exchange market last month -- the largest amount since the middle of last year.
The other 400m of an 870m rise in net reserves stemmed from a 4% increase in the price of gold and a rise in the dollar value of euro holdings, it said.
"While these estimates are subject to some error, this is a large enough figure to suggest that they were almost certainly in the market in a meaningful way," RMB said.
In the past few months, former Reserve Bank governor Tito Mboweni has repeatedly said the rand's latest gains were unwelcome and the Bank had bought foreign exchange more aggressively to curb the trend.
But there had previously been little evidence to suggest that this was the case. The Bank's reserves have instead been boosted in the past few months by the proceeds of a foreign bond issue and allocations from the International Monetary Fund.
During the release of the Treasury's medium-term budget last month, Finance Minister Pravin Gordhan said he was concerned at the rand's strength, which curbs the competitiveness of local exports.
He also said that the Treasury would do all it could to support the Bank in its foreign exchange purchases, which have become increasingly expensive.
Economic Development Minister Ebrahim Patel said last week he had met with business and labour to discuss the effect the rand's strength was having on the economy.
Also last week, Bank deputy governor Daniel Mminele said there would be no change in the Bank's policy of not intervening in currency markets to influence the rand.
Mminele acknowledged that the currency's sustained strength could increase the likelihood of "uneven economic recovery."
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