The continued and broad-based weakness of the United States dollar in the international currency markets was one of the major factors that caused the rand to appreciate on a trade-weighted basis by 16% during 2003 and by 9% in the first seven months of 2004, South African Reserve Bank (SARB) Governor Tito Mboweni said in his inaugural address of his second five-year term on Tuesday.
Confirming SARB policy of gradually improving South Africa’s foreign-exchange reserves, Mboweni noted that a consequence of this policy and by acquiring the proceeds arising from the government’s external borrowing programme, the negative net open foreign-currency position (NOFP) was expunged in May 2003 and the oversold forward foreign-exchange book was closed out in February this year.
The external value of the rand was also supported by a combination of other factors, including greater price stability, rising precious metal and other commodity prices, relatively higher domestic interest rates than those of industrialised countries, the removal of the structural impediments in the foreign-exchange market and generally improved international perceptions about the fundamentals of the South African economy. — I-Net Bridge