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SA Reserve Bank Governor Lesetja Kganyago sees little point in the central bank trying to intervene in global currency markets to prop up the rand.
Kganyago was speaking at the closing of the bank's Biennial Conference on Friday morning, where he answered questions about the bank's mandate.
He said that SA's foreign exchange market functioned well and was "deep and broad". About 70% of rand-traded foreign exchange transactions take place outside of SA. If the bank truly wanted to intervene, it would need to do so "24 hours a day" and have people in financial centres around the world.
The governor said the bank was badly burned in 1998 when it invested $26bn in an effort to prop up the rand with "nothing to show for it".
"The currency still ran away from us," he said.
The efficacy of interventions had not been truly tested, he said, adding that an invention may "exacerbate the volatility" instead of dampening it down.
Nevertheless, he said that in every generation a younger group of central bankers thought it "cool' to intervene and try their hand where their predecessors had failed. "[But] I remain to be convinced about the efficacy of intervention," he said.
He added that if there was market dislocation, a case could be made to intervene. But, he argued, central bankers need some humility. "Of the many things we are able to control, the exchange rate is not one of them."
