No new measures to curb rand

Cape Town - South Africa is ready to take "appropriate steps" to temper swings by the rand, and is monitoring the effect of capital controls imposed by other emerging economies, Finance Minister Pravin Gordhan said on Wednesday.

However, in his 2011/12 budget speech Gordhan outlined no specific measures to curb the strength of the currency other than continuing to back dollar-buying by the central bank.
 
"Government will continue to assist the Reserve Bank to accumulate foreign exchange reserves when market conditions are favourable, and engage in foreign currency swaps to moderate the effect of capital flows on the exchange rate," he said.

Net inflows of R92bn last year pushed the rand up 12% against the dollar, and the unit has gained more than 20% since the start of 2009.

However, the pressure has eased somewhat this year, with outflows pushing the currency down 8.5% since the start of January.
 
South African officials have repeatedly said capital controls will not work for an economy that relies heavily on foreign investment, but Gordhan said he had been studying measures taken by Brazil, South Korea and Thailand last year to rein in their currencies.
 
"We have examined these options and will continue to monitor the adjustments made in other countries," he said.

Reserve Bank governor Gill Marcus told a news conference that she did not have any specific target for the currency.

"The objective for us is to address the volatility of the currency and we do not target a particular rate of exchange. That would be inappropriate," Marcus said. "We do intervene in the market in order to build reserves, not to target the level of exchange."

The rand firmed markedly against the dollar in afternoon trade on Wednesday, reaching an intraday best of R7.0371/$ while Gordhan delivered his speech.