SA rules out Rand pegging

| Thursday April 8, 2010 00:00

Both the government and the central bank have in the last few months expressed concern that the stronger rand undermines export competitiveness and therefore economic growth, but say the need for a stable, competitive exchange rate does not translate into fixing the currency.

Business Report quoted Reserve Bank head of economic research Johan van den Heever as telling legislators that maintaining a currency peg required large foreign exchange reserves.

He used the example of China, which has amassed huge volumes of foreign reserves in the process of keeping the yuan's value pegged to the dollar.

'If you have a currency peg, then you need much (larger) foreign currency reserves,' van den Heever was quoted as saying.

'They (China) have accumulated foreign currency reserves on a scale that one cannot believe.'

Allies of South Africa's ruling ANC have pushed for the government to intervene to weaken the rand, saying it has hurt the manufacturing sector, now slowly recovering after its plunge last year pushed the country into recession, leading to massive job losses.

The rand   gained about 30 percent against the dollar last year  and hit a new 20-month high of 7.1950 earlier yesterday.

Last month, National Treasury Director General Lesetja Kganyago said South Africa needed to find ways of moderating currency volatility but fixing the rand at a set level would be hard to implement and costly. (Reuters)