SA reserves rise through key level

JOHANNESBURG – South Africa’s gold and foreign exchange reserves jumped in December, with the overall level breaching the psychologically important US$20 billion mark for the first time, central bank data showed yesterday.

Net reserves rose by US$698 million to US$17,186 billion as gold prices edged up and the foreign exchange component surged – showing that the central bank had been buying dollars during the month, taking advantage of gains in the local rand currency. Economists said the build-up in reserves was positive but still fell short of what many view as an optimum level, which would provide the continent’s biggest economy with six months’ import cover.”The continued build-up in reserves looks good but our import cover is still pretty much unchanged at four months,” Nedbank economist Nicky Weimar said.”Still overall it’s positive.”Gross reserves increased to US$20,65 billion from US$19,908 billion at the end of November, the bank said in a statement.The overall foreign exchange component rose by US$664 million, despite a 2,5 per cent appreciation of the average exchange rate for the rand calculated by the central bank during the month.”We would expect another healthy build-up in reserves in January given the strength we’ve seen so far in the rand.It’s also nice to see gross reserves top the …important US$20 billion level…”said ETM markets analyst George Glynos.Total gold and foreign exchange assets, which are denominated in the local currency, rose to 130,46 billion rand from 129,15 billion rand at the end of November.The rand softened to 6,10 to the dollar from an eight-month peak of 6,08 after the figures were released, with analysts betting the South African Reserve Bank would step up the pace of forex buying as the unit nears the key level of six to the dollar.The central bank has repeatedly said it will buy foreign exchange cautiously as it builds its reserves to avoid affecting the value of the rand, which has been volatile in the past.But sustained gains in the rand between 2002 and 2004 have hit the competitiveness of domestic exports, eroding the profits of some top companies and prompting job cuts in the country’s key manufacturing and mining sectors.South Africa brought a long-standing negative reserves position into balance early in 2004 with the elimination of its forward book.Since then net reserves have more than doubled, but still tend to lag comparable emerging markets.- Nampa-ReutersEconomists said the build-up in reserves was positive but still fell short of what many view as an optimum level, which would provide the continent’s biggest economy with six months’ import cover.”The continued build-up in reserves looks good but our import cover is still pretty much unchanged at four months,” Nedbank economist Nicky Weimar said.”Still overall it’s positive.”Gross reserves increased to US$20,65 billion from US$19,908 billion at the end of November, the bank said in a statement.The overall foreign exchange component rose by US$664 million, despite a 2,5 per cent appreciation of the average exchange rate for the rand calculated by the central bank during the month.”We would expect another healthy build-up in reserves in January given the strength we’ve seen so far in the rand.It’s also nice to see gross reserves top the …important US$20 billion level…”said ETM markets analyst George Glynos.Total gold and foreign exchange assets, which are denominated in the local currency, rose to 130,46 billion rand from 129,15 billion rand at the end of November.The rand softened to 6,10 to the dollar from an eight-month peak of 6,08 after the figures were released, with analysts betting the South African Reserve Bank would step up the pace of forex buying as the unit nears the key level of six to the dollar.The central bank has repeatedly said it will buy foreign exchange cautiously as it builds its reserves to avoid affecting the value of the rand, which has been volatile in the past.But sustained gains in the rand between 2002 and 2004 have hit the competitiveness of domestic exports, eroding the profits of some top companies and prompting job cuts in the country’s key manufacturing and mining sectors.South Africa brought a long-standing negative reserves position into balance early in 2004 with the elimination of its forward book.Since then net reserves have more than doubled, but still tend to lag comparable emerging markets.- Nampa-Reuters