The South African Reserve Bank (SARB) wants to see a strong rand, due to the positive impact it has on inflation, the central bank’s governor Tito Mboweni said on Tuesday.
”Yes, we would like to see a strong rand, much stronger than it is now,” he told Parliament’s finance portfolio committee.
While the Bank did not have a particular level in mind, there should be no doubt that it preferred a stronger currency because of the impact it has on production prices and inflation generally.
Given its influence on price outcomes, the central bank would always prefer a strong and less volatile rand.
Mboweni said he had listened to the concerns raised by mining companies and exporters about the negative impact of the stronger rand on earnings, and investment prospects, but was unconvinced.
”We will listen to them but they must listen to what we are saying.
”We certainly have no intention of weakening the rand, that point must be clear to everybody, we have no intention of weakening the rand, absolutely no intention,” he said.
Exporters have expressed unhappiness about the sharp appreciation of the currency over the last 18 months — since it hit an historic low against the US dollar of R13,85 in December 2001.
The rand was last trading at around R7,90 to the US unit.
Mboweni said a major mining corporation had complained of the impact the strengthening rand would have on its earnings, given that the company had planned rand earnings on projections of a depreciating currency.
”This notion that the rand is just a one way bet is wrong,” he said.
The governor also said that CPIX — consumer price inflation less mortgage costs — should fall to the mid-point of the inflation target, about 4,5% by 2004, provided there were no external shocks. – Sapa