BD; Forex, gold reserves dip 1% on dollar strength
SA’s gold and foreign exchange reserves fell about 1% last month as the dollar appreciated against other currencies, leading to valuation adjustments.
Gross reserves dropped 1,1 % to R33,7bn at the end of last month, while net reserves, which exclude foreign borrowing, slipped by the same amount to R33,1bn, official data showed last week.
Over the whole of last year, net reserves — also known as the international liquidity position — rose $2,2bn, well below increases of $8,3bn and $5,8bn in 2007 and 2006 respectively.
“Uncertainty and volatility in global financial markets have continued to inhibit the Reserve Bank’s natural tendency to accumulate reserves," said Nedbank economist Isaac Matshego.
“ Global uncertainty is likely to persist in the short term as the outlook for the global economy deteriorates, reserves will probably remain under pressure over the next few months.”
The Bank has said it would continue to accumulate foreign exchange reserves, but would not do so at a pace which could affect the value of the rand.
SA’s reserves have climbed steadily since the central bank brought a long-standing negative position into balance early in 2004 with the elimination of its loss-making forward foreign exchange book.
But the reserves still significantly lag holdings in other emerging economies, which is a worry given the persistent deficit on SA’s trade balance.
Efficient Research economist Fanie Joubert said that SA’s import cover ratio improved marginally to 18 weeks last year from 17,5 weeks in 2007.
Foreign exchange reserves fell 1,9% to $30,04bn last month, reflecting a fall of more than 9% in the value of the rand against the dollar, according to the Bank’s data.
But gold reserves supported the position for the third month in a row, rising $212m to $3,484bn as the gold price continued to recover from its slump last year, rising about 6%.
“We expect changes in reserves to continue to be driven mainly by revaluation adjustments resulting from foreign currency and gold price movements," said Absa Capital economist Monale Ratsoma.
Capital outflows also make it difficult for the Bank to build reserves. Foreigners continued to sell local assets last month, with net equity sales of R3,8bn and net bond sales of R5,4bn, Matshego said.
