SA reserves lifted by international bond

Johannesburg - South Africa’s gold and foreign exchange reserves edged higher in January, Reserve Bank data showed on Tuesday, partly boosted by flows from the government’s international bond sale, a firmer gold price and a weaker dollar globally during the month.

Net gold and foreign exchange reserves, or the international liquidity positive, increased to $49.072bn in January from $47.867bn in December, while gross reserves rose to $51.451bn from $48.86bn, the Bank said in a statement posted on its website.

The forward position, which represents the bank’s unsettled spot or swap transactions, was at $6.555bn compared with $6.534bn in December.

“The increase in gross reserves was primarily due to the proceeds of the recent $1.5bn government international bond issue which were deposited with the Bank,” the central bank said.

“The gross reserves were further positively impacted by valuation adjustments stemming from the increase in the market price of gold and the depreciation of the US dollar against the other major currencies.”

South Africa issued a $1.5bn 12-year global bond with a coupon of 4.665% which attracted bids totalling $3bn mainly from investors from Europe and the United States.

Analysts had expected the Reserve Bank to take advantage of the local rand currency’s 3.2% gain against the dollar during January to boost it reserves, which had declined over the previous two months.

“The improvement in South Africa’s reserves should be of benefit to the currency over the longer-term as a stronger reserves position should help to reduce the currency’s volatility,” Standard Bank strategist Nomvuyo Guma said in a note.