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Modest increase in South African Bank’s reserves
THE Reserve Bank of South Africa has increased its gold and foreign exchange reserves only modestly last month, as both commodity and currency markets remained volatile.
Data released by the Bank has shown that gross reserves increased to $24,16bn last month, up from $23,95bn in June. Analysts said that accumulation of reserves was likely to increase at a moderate pace in the short to medium term, until direction in both domestic and international markets became clearer. “Should an opportunity present itself
for the Bank to up its accumulation without unsettling the market, they are likely to act accordingly,” said Standard Bank economist, Shireen Darmalingam.
The rand ended last month stronger, at about R6,87 to the dollar, compared with R7,17 in June, giving the Bank an opportunity to increase its foreign exchange reserves by $213m in the month.
“The increase in July was not as aggressive as the monthly average of $479m since the start of this year, and a monthly average of $453m last year,” Darmalingam said. Net reserves, also known as the international liquidity position, increased to $20,44bn ($20,18bn). “An interesting observation of latest reserves data is that the central bank may not have actively sought to boost reserves while the rand was volatile, but it also did not squander foreign currency to defend the rand against speculation.”
This stance, of not using forex reserves to protect the rand, can be traced to when Tito Mboweni became governor of the Bank in 1999. “This has not only enhanced the credibility and autonomy of the Bank, but can also be expected to be an influencing factor in the next upgrade of South Africa’s sovereign rates.” Rand-denominated reserves
fell to R165,9bn, compared with R171,5bn in June. And gold prices rose 5% in the month, which saw gold reserves rise to $2,5bn ($2,4bn).
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