SARAH BULLEN and Reuters, Cape Town | Thursday 10.45am
COMBINED gold and foreign exchange reserves beat economists’ forecast continuing their upwards rise in November to $7,4-billion — a $500-million rise from October’s reserves, Reserve Bank figures released on Thursday show.
In rand terms this translates into a rise of R2,6-billion to R45,2-billion from October’s R42,6-billion.
This shows that capital inflows more than covered the current account deficit during the month. The central bank gave only headline figures. A full breakdown will be published on December 8.
Analysts polled by Reuters had predicted combined reserves of R44,3-billion, with the range from R43,3-billion to R45,1-billion — with the better-than-expected figures sending a positive signal on the country’s crucial current account.
The Bank said its use of foreign credit lines was R19,8-billion at the end of November, up from R19,7-billion at the end of October.
Rand Merchant Bank economist Etinne le Roux said that this is considerably less than in previous months and may indicate the SARB’s satisfaction with the current reserves position. The outstanding oversold position on the forward book was $18,1-billion leaving the net open foreign currency position (NOFP), which measures its exposure in the forward foreign exchange market and is seen as the Achilles heel of the rand, at $14,0-billion at close of business on 30 November 1999. This compares to $14,9-billion at the end of October.
Economists said that strong portfolio inflows and a slightly stronger rand over November allowed the SARB to further bring down its net oversold forward currency commitments.
Said Le Roux: ”While the forward book remains a concern, its rate of decline should provide some comfort to the market.” From its lowest point in August last year, the SARB’s net reserves have improved $2-billion while its oversold forward position has shrunk by $7,3-billion, leading to an overall improvement in the NOFP of $8,1-billion. ”This demonstrates the SARB’s commitment to reducing its role in the forward currency market, and suggests that the forward book is likely to remain the main beneficiary of foreign capital inflows going forward,” Le Roux added.