JOHANNESBURG May 3 (Reuters) – South African central bank
governor Gill Marcus said on Thursday it would be costly to
fight the volatility of the rand through direct intervention.
Emerging markets are seeing greater exchange rate volatility
as near-zero interest rates in developed economies lead
investors to seek yields in riskier but higher yielding assets.
“So what can be done? Direct intervention is one option,”
Marcus said in an opinion piece published by the Financial
Times.
“(But) with average daily turnover in the domestic foreign
exchange market of about $16 billion, trying to lean against
currency moves would require a lot of costly intervention.”
South Africa’s gross foreign currency and gold reserves —
which would provide some of the firepower needed to reduce rand
volatility — stood at nearly $50 billion at the end of March.
Marcus also said lowering interest rates was not an option
because the inflation rate was already too high in Africa’s
biggest economy.
The central bank targets inflation of between 3 and 6
percent. Headline consumer inflation slowed to 6 percent in
March, returning to the target band for the first time since
November.
The rand gained about 30 percent on the dollar
between 2009 and 2010 but lost about the same amount between
August and November last year when it tumbled to a two-year low.
(Reporting by Tiisetso Motsoeneng; Editing by Myra MacDonald)
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