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Johannesburg - The SA Reserve Bank (Sarb) will continue to support the measured steps proposed by the National Treasury to mitigate the high volatility in the exchange rate, Monde Mnyande, advisor to the governor and chief economist of the Sarb, said in a speech prepared for delivery on Friday.
"The Sarb has in the past monitored, and will continue to
monitor developments in the exchange rate of the rand, and will
intervene in the foreign exchange market when necessary," he said.
Mnyande was speaking at the Inkululeko Media & Marketing Power
Breakfast in Muldersdrift.
The extent of intervention, however, had to be limited given the cost implications of the exercise.
"In addition, the level of reserves the Sarb has accumulated
thus far (some $40bn) is not at all high relative to daily
trade volumes in the rand foreign exchange market, which often
exceeds $10bn on a given day," Mnyande said.
Most importantly though was that the exchange rate had to be
flexible enough to prevent persistent misalignments that would harm the competitiveness of domestic producers and their trade
performance.
"At the same time, excessive volatility of exchange rate has to
be avoided, as this heightens the risk of long-term investment,
increases domestic inflation and encourages financial speculation," Mnyande said.
- Sapa