No major intervention to ease rand

Johannesburg - South Africa's international reserves edged higher in August, mainly driven by a rise in the forward position and suggesting the central bank had not sold currencies aggressively to ease the rand's gains.

Data posted on the Reserve Bank's website on Tuesday showed net gold and foreign exchange reserves stood at $39.178bn at the end of August from $38.665bn in July. Gross reserves dipped to $43.133bn in August from $43.159bn.

Foreign currency reserves fell $259m to $35.464bn while gold reserves increased by $255m to $4.97bn.

Tradition Analytics said in a note while the data showed a net purchase of foreign exchange of about $500m, the forward position which includes unsettled foreign currency spot, forward and swap transactions climbed by around the same margin, suggesting real forex accumulation in August was "negligible".

"For all the talk in policy circles of the rand being too strong and the concerns over the extent of foreign portfolio inflows, the ... Reserve Bank has been very inactive in the currency markets in recent months," it said.

Both the South African Reserve Bank (SARB) and the government have expressed concern the rand is overvalued, with the currency touching a two and a half month high of 7.1527 against the dollar last Friday.

The central bank has however repeatedly said it does not target a level for the rand, and that it would only intervene in the foreign exchange market where "appropriate".

But Governor Gill Marcus said last week the SARB was "grappling" with the question of what to do with the strong currency which traded at 7.2585 against the dollar on Tuesday.

"The Reserve Bank is fully mindful of the difficulty in managing the rand as part of its holistic monetary policy strategy, and the Bank certainly seems reluctant to play too strongly in the open market," said Tradition Analytics.