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Kganyago: SA bond buying to continue

Johannesburg - There is no reason why foreign purchases of government bonds, which have supported the rand currency, should not continue, said Reserve Bank deputy governor Lesetja Kganyago in Business Day newspaper.

Foreigners bought R52.6bn by September 2, partly attracted by higher real interest rates.

"I see no reason why they could not continue," he told Business Day newspaper in a story published on Thursday.

Foreign buying of local bonds has picked up pace in the last three months, pushing government's borrowing costs to record lows of 6.27% on the 2015 bond.

Increased foreign buying of bonds has helped to support the currency, which has recovered from one-year lows of R7.50 hit in early August and was last trading at R7.14 against the dollar.

Kganyago said the rand is "definitely not competitive at the moment, but what level it should be, I don't know."

The rand has firmed by more than 25% against the dollar since the beginning of 2009, with analysts in a Reuters poll seeing the currency steady over the next six months.

Kganyago also told the paper South Africa should have run bigger budget surplus in the two years prior to recession in 2009 - the country's first in almost two decades.

"One could say with hindsight that South Africa should have run bigger surplus... when the times were good. It would have meant we would have had a bigger war chest to respond to the recession," he said.

He said running budget surplus in 2006/07 and 2007/08 financial years allowed South Africa to accumulate reserves more "cheaply and visibly".

Reserve Bank data on Wednesday showed reserves accumulation continued steadily, with gross reserves rising to $51.449bn by the end of August. 

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