SA reserves jump higher

Johannesburg - South Africa's net reserves rose in October, official data showed on Friday, pointing to heightened efforts by the Reserve Bank to intervene in the market and try and curb gains in the rand.

The rand has gained nearly 30% against the dollar since the beginning of last year as foreign investors buy emerging market assets offering higher yields than those in developed countries.

Net gold and foreign exchange reserves stood at at $43.112bn at the end of October from $40.854bn in September, the South African Reserve Bank said in a statement posted on its website on Friday.

Gross reserves edged slightly higher to $44.2bn in October from $44.069bn.

The forward position, which represents the bank's unsettled spot or swap transactions, was at $3.124bn compared with $1.122bn in September.

The bank started using the forward position in August to mitigate the sterilisation costs of building reserves - it buys dollars in the spot market and enters into longer-term contracts to settle them.

"The jump in net reserves is a little bit higher than what the market and ourselves were expecting ... The Reserve Bank has again bolstered their forward position by engaging in longer term foreign exchange swap operations," said Jeffrey Schultz, a macro strategist at Absa Capital.

"It shows that they are trying to do something in terms of stemming the tide of currency appreciation given what is going on globally currently where we are seeing a wall of money continuing to flood emerging markets".
The rand traded at R6.8050 against the dollar at 08:47, up 0.11% from Thursday's closing level. It was at R6.81/dollar prior to release of the reserves data at 08:00.