The South African Reserve Bank (SARB) said on Wednesday that it did not use its reserves to influence the exchange rate of the rand and has not been required “in any way” to use its reserves to support the stability of the financial system.
“The reduction in borrowed reserves was a strategic decision taken as South Africa’s foreign reserves position became healthier and the reduction had not been initiated by the financial crisis,” said the SARB.
The decline of about $500-million in gross reserves at the end of February this year was attributed to valuation changes as the price of gold declined and the US dollar appreciated.
The financial crisis has seen other emerging market countries use part of their reserves as counter-cyclical stabilising measures in various ways, such as supporting exchange rates and industries.
The SARB also said elsewhere in its report that recent interest rate changes were not intended to influence the level of the exchange rate, which is left to be determined by market forces.
“It was also not to assist the banking sector or to react to the global financial crisis. South Africa’s banking sector and financial markets continued to operate effectively during the crisis to date,” said the SARB. — I-Net Bridge