MARIAM ISA, Johannesburg | Friday 10.50am.
THE country’s reserves of gold and foreign exchange rose in May despite a heavy outflow of capital during the month, data on Friday showed, sending a good signal to domestic markets recovering from a recent beating.
The country’s central bank also managed to keep its net open foreign exchange position — which measures its uncovered exposure to the forward foreign exchange market — unchanged at its April level of $10,2-billion, despite the weaker rand.
Gross reserves rose to R50,7-billion rand from R50-billion in April, a touch below forecasts of a one billion rand increase, the South African Reserve Bank said.
A Reuters survey showed consensus forecasts for a fall of $100-million in the NOFP — seen as the Achilles heel for the rand — but markets appear to be unperturbed by the news.
”The fact that they [reserves] continued to rise in a period of greatly negative sentiment, with big capital outflows in May and big pressures on the rand, was quite encouraging,” said Nico Czypionka, chief economist at SG Securities.
”The most encouraging thing is that it is the fourth or fifth good set of data in the course of the last month — I think it will help underpin sentiment because there was fear of a setback,” he said.
South Africa’s debt and currency market responded favourably to the news, with the rand firming to R6,94 to the dollar from R6,96 ahead of the news and R6,99 late on Thursday. The yield on the benchmark five-year bond, which moves in the opposite direction to prices, was a touch firmer at 13,77%.
Economists were quick to point out that the reason the central bank was unable to carry on with its efforts to reduce the NOFP during May was because of the weak rand, which lost 6% of its value to the dollar in May. — Reuters