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Reserve Bank unlikely to stabilise rand


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Old 04-09-2014, 01:58 PM   #1
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Art Reserve Bank unlikely to stabilise rand

While the rand is expected to remain volatile, the Reserve Bank is unlikely to intervene in the market to try to stabilise the currency, says Governor Gill Marcus.

Speaking at the European Economic and Financial Centre in London on Tuesday, the governor said the currency has followed a volatile trend and that this trend is expected to continue.

“While the exchange rate has been an important shock absorber for the South African economy, some concern has been expressed regarding its volatility. We have not attempted to intervene directly in the foreign exchange market, as we do not believe that such intervention would be effective, given the size of South Africa’s foreign exchange market, and our relatively low level of foreign exchange reserves of around US$50 billion,” she said.

The currency, which had touched five year lows, has made some ground after the central bank raised interest rates at its first meeting of the year in January.

The central bank said the surprise hike was the beginning of a moderate monetary tightening cycle.

Interest rates, noted the governor, cannot remain indefinite, even though the state of the country’s economy has justified accommodative interest rates.

“While such an accommodative stance has been considered appropriate given the developments in the real economy, pressures from the exchange rate and capital flows and the possible normalisation of monetary policy in the US imply that this stance cannot be maintained indefinitely,” she said.

At its meeting in March the reserve bank left rates unchanged.

However, this did not mean that “we blindly follow US monetary policy”, she said. - SAnews.gov.za
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