Port Elizabeth - South Africa's central bank has been buying more dollars over the past month, leading to a significant rise in reserves, its Governor Tito Mboweni said on Thursday.
Speaking at a meeting in the southern coast city Port Elizabeth, he also defended the policy of inflation targeting, adding it should remain the mandate of the bank after his departure next month.
"The bank's policy at the moment is to cream off more dollars," he said. "The reserves have gone up quite significantly."
Mboweni told Reuters last month the rand's strength was overdone and that there could be a retracement.
He told reporters a week later the central bank was worried about the impact the currency's relative strength was having on the economy, and suggested it would look into what could be done.
The rand rallied to a 13-month high of 7.2925 against the dollar in August and a 19-month peak against the euro, but was weaker on Thursday, knocked by the collapse of merger talks between mobile phone group MTN and India's Bharti Airtel.
It was trading at 7.63 to the greenback at 15:00, having earlier slipped to a one-month low of 7.6860.
Mboweni has repeatedly stressed the Reserve Bank's policy was not to influence the level of the currency, but that it would buy dollars to build reserves when possible.
However, despite a $2.2bn boost from the International Monetary Fund - as part of a global funding facility - reserves have remained fairly steady during 12 months of global financial uncertainty.
Net reserves stood at $36.922bn at the end of August. September data is due next week.
Mboweni said inflation targeting, which has come under severe criticism from the ruling ANC's trade union allies, was an important monetary policy tool and should stay.
"Inflation targeting is a very useful tool in terms of the monetary policy framework. It assists the public to understand what the objective of the Reserve Bank is," he said.
Finance Minister Pravin Gordhan has suggested the framework should be debated, but that it remains the policy of the government.
The African National Congress has also said central bank policies will not change, despite Gill Marcus succeeding Mboweni as head of the bank next month, and demands for labour federation Cosatu for them to be scrapped.
Cosatu argues efforts to meet the 3% to 6% band have kept interest rates too high - the central bank's repo rate stands at 7% after 5 percentage points in cuts since December to try lift the economy out of recession.
Inflation has slowed sharply this year but at 6.4% year-on-year in August, remains outside the target range.
On the MTN-Bharti deal, Mboweni said the authorities had wanted the company to remain a South African entity.
The long-running merger talks, which could have led to big capital inflows, ended on Wednesday, with Bharti blaming the South African government's rejection of the terms of the proposed deal.
- Reuters