SA’s reserves hit US$20bn mark

Analysts expect strong reserves accumulation to continue in the months ahead, aided by strong commodity prices and a resilient rand. Net reserves, also known as the international liquidity position, increased to US$20 billion last month, from US$19,5 billion in March. Gross reserves increased to US$23,8 billion (US$22,9 billion). Foreign-exchange reserves rose US$644 million to US$21,27 billion. The apex bank said the increase in reserves reflected a combination of valuation adjustments and foreign-exchange operations in the bank’s own account, and on behalf of customers. “The rand appreciated about 3 percent versus the dollar last month, and the bank appears to have used forex accumulation as a tool to lean against rand strength,” JPMorgan economist Marisa Fassler said yesterday. The rand dipped below R6 to the dollar a few times last month. “While the currency has played a pivotal and supportive role in the accumulation process, the bank has time and again emphasised that its intention is not to influence the currency,” said Standard Bank economist Shireen Darmalingam. The accumulation of gold reserves increased to US$2,56 billion (US$2,33 billion) during the month, as the gold price increased 10 percent. Bullion climbed as high as US$643,50/oz last month. “It seems as if gold has regained safe-haven status as geopolitical uncertainty drives oil quotes higher every day,” Darmalingam said. “Without an immediate solution to the oil supply constraints, the upside risk of higher oil prices increases as the days and weeks go by, and almost by default, the gold price continues to climb,” she said. The spot price of gold was quoted at US$681,50/oz yesterday, while Brent crude was trading at US$71,06 a barrel. The rand was changing hands at R6,04 to the dollar. Rand-denominated gross reserves rose to R154,6 billion last month. “As commodity prices continue rising unabatedly, we do not see a material depreciation in the currency in the short to medium term, continuing to support reserve accumulation,” said Darmalingam. ‘ Business Day.

May 2006
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