Rand weakening exaggerated says Reserve Bank Deputy Governor
The most recent exchange rate movements, including today’s, are somewhat exaggerated,” Reserve Bank Deputy Governor Daniel Mminele said on Thursday.
The most recent exchange rate movements, including today’s, are somewhat exaggerated,” Reserve Bank Deputy Governor Daniel Mminele said on Thursday.
The movements of the rand, which has to date weakened to a four-year low against the US dollar, are slightly exaggerated, says Mr Mminele.
The currency has breached the R10 level against the dollar. It closed at R10.04 on Thursday, after closing at R9.83 on Tuesday, a level last seen in November 2008.
Speaking at the 7th Annual Financial Markets Department Cocktail, Mminele said that the local currency has been on a depreciating trend partly due to the strengthening of the dollar and the decline in commodity prices.
The rand exchange rate has steadily underperformed the currencies of its commodity-producing or emerging market “peers” in the last year.
“This trend, which contrasted with the more stable pattern of the rand versus its peers … clearly indicates a growing sensitivity of the currency to domestic factors, such as concerns about the funding of a wider current account deficit, as well as broader socio-economic issues illustrated by increasing violent labour conflicts in the mining and other sectors,” said the deputy governor.
Mminele said that the central bank continues to be committed to a flexible exchange rate and that it does not have an exchange rate target.
“This commitment should not be misread to suggest that any abrupt and disorderly movements in the exchange rate would not be of concern to us,” he said.
Strengthening the economy
Earlier this month, the bank kept the repo rate unchanged at 5%, a 30-year low. This as it tries to balance the possibility of inflation breaching the bank’s 3% - 6% target.
In April, the Consumer Price Index (CPI) came in at 5.9%, unchanged from the previous two months.
A temporary breach of the upper end of the bank’s target range is expected in the third quarter but at a lower average of 6.1% (from 6.3% previously), said the bank at the announcement of its decision on interest rates last week.
At a special media briefing on Thursday on the economy, with an emphasis on mining, President Jacob Zuma said that South Africa must strengthen its economic performance as well as increase its level of investment if its economy is to grow.
He said although the country was among the first few to recover quickly from the global financial meltdown, the “recovery has not been as strong as needed”.
“We need faster growth. Without faster growth, we cannot succeed in reducing unemployment, poverty and inequality. Growth in the remaining three quarters of the year will have to be much higher for us to achieve the projected annual growth of 2.7%,” Zuma told the media at the Union Buildings.
He said government will redouble efforts to support the economy towards achieving this.
The President said government could not do this alone, while calling for business, labour and the community to play their part
Mminele added that the global economy had witnessed some improvement, but that it “continues to be a slow, unbalanced and fragile recovery”.
