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Cape Town - The “overvalued” rand has moved in the right direction but is not yet at competitive level, Trade and Industry Minister Rob Davies said on Friday.
The rand fell sharply against the dollar in September, hitting a 28-month low of R8.4950/$ on September 22. It has since recouped some of those losses and was last trading at R7.8530/$ on Friday from R7.8540 before Davies’ comments.
The manufacturing sector shrunk by 7.0% in the second quarter, with producers blaming the rand for its woes. The rand hit R6.5410/$ in the second quarter, its strongest since late 2007.
“We’ve had an overvalued exchange rate for a long time. Now it’s moved a little bit in the right direction, but it’s become more volatile,” Davies told journalists.
“If it has moved slightly in the right direction, I don’t think it is at a competitive level yet,” Davies said in response to questions.
The currency has been extremely volatile since the debt crisis in the eurozone deepened, raising worries of another global slump.
Finance Minister Pravin Gordhan has said the government would like to see a more stable currency but does not know how to achieve that.
Direct intervention to stabilise its level would be tricky for government because the currency is too heavily traded.
About 60% of its trading is abroad, and daily turnover is around $4-6bn - around 10% of South Africa’s foreign reserves.
Davies said the rand seemed to be driven more by developments around the eurozone debt crisis than by domestic economic fundamentals.
South African authorities are worried about the crisis in the eurozone because it is a major trading partner, accounting for a third of local exports.
The rand fell sharply against the dollar in September, hitting a 28-month low of R8.4950/$ on September 22. It has since recouped some of those losses and was last trading at R7.8530/$ on Friday from R7.8540 before Davies’ comments.
The manufacturing sector shrunk by 7.0% in the second quarter, with producers blaming the rand for its woes. The rand hit R6.5410/$ in the second quarter, its strongest since late 2007.
“We’ve had an overvalued exchange rate for a long time. Now it’s moved a little bit in the right direction, but it’s become more volatile,” Davies told journalists.
“If it has moved slightly in the right direction, I don’t think it is at a competitive level yet,” Davies said in response to questions.
The currency has been extremely volatile since the debt crisis in the eurozone deepened, raising worries of another global slump.
Finance Minister Pravin Gordhan has said the government would like to see a more stable currency but does not know how to achieve that.
Direct intervention to stabilise its level would be tricky for government because the currency is too heavily traded.
About 60% of its trading is abroad, and daily turnover is around $4-6bn - around 10% of South Africa’s foreign reserves.
Davies said the rand seemed to be driven more by developments around the eurozone debt crisis than by domestic economic fundamentals.
South African authorities are worried about the crisis in the eurozone because it is a major trading partner, accounting for a third of local exports.
