Cape Town – The South African Reserve Bank (Sarb) said late on Monday it may consider becoming involved in foreign exchange markets to ensure orderly price action.
The bank said it had maintained over many years its position of not intervening in the foreign exchange market.
“This position, however, does not suggest that the Sarb is completely indifferent to exchange rate movements,” it said in a statement.
It said threats to the “orderly functioning of markets or (developments) that may have financial stability implications”, could require the bank to get involved.
“Developments in SA markets in recent days are largely a response to external factors, and market indicators have moved in line with those in other financial centres,” the Sarb said.
“From a monetary policy perspective, having previously indicated that the exchange rate represents a significant upside risk to inflation, the impact of exchange rate developments on the inflation trajectory will be considered in conjunction with other relevant factors.”
The Sarb’s comments follow a sharp drop in the rand against major currencies on Monday, in line with other emerging market currencies and as global equity markets took a beating.
On Tuesday morning the currency was trading at R15.17/€ (-0.67%), R20.73/£ (-1.53%) and R13.15/$ (-2.12%), according to data from INET BFA.
The rand, which briefly touched R14.07/$ overnight on Sunday, has weakened 6.2% since the last Monetary Policy Committee meeting and 25% over the last year. – Fin24
