Rand's exchange rate increased in 2009's final quarter

Tuesday, March 23, 2010

Pretoria - In the fourth quarter of 2009, the weighed average exchange rate of the rand increased by 1.2 percent, the Reserve Bank said on Tuesday.

"The weighted average exchange rate of the rand increased, on balance, by a further 1.2 percent during the fourth quarter of 2009," said the Reserve Bank in its March Quarterly Bulletin.

According to the bank, the appreciation of the exchange value was supported by the persistent rise in international commodity prices, improved external trade position as well as positive sentiment towards South Africa as it is about to host the World Cup.

"In addition, the acceleration in real economic growth and an improved inflation outlook gave further impetus to the exchange value of the rand in the final quarter of 2009," said the central bank.

However the bank said that on a monthly basis, the exchange rate of the rand remained volatile, that the nominal effective exchange rate of the rand decreased on balance by 5.4 percent in October. This however increased by 3.8 and 3.1 percent in November and December respectively.

For the calendar year of 2009 the weighted average exchange rate of the rand increased, on balance, by 22.9 percent compared with a decline of 23.5 per cent in 2008.

It said that the strengthening of the US dollar from the end of 2009 to the end of February 2010 caused the nominal effective exchange value of the rand to decline by 2.8 percent over the period.

Analysis of the nominal effective exchange rate of selected emerging-market and commodity-producing economies showed that domestic currency traced the movement of other emerging-market economies, and that the rebound in most of these currencies was buoyed by the resurgence in international demand for commodities produced by these economies.

"The observed developments in the currencies of selected emerging-market economies further indicate that the exchange value of the rand seemed to be among the more resilient currencies over the period," it said.

It further said that the average net daily turnover in the domestic market for foreign exchange increased from US$14.5 billion in the third quarter of 2009 to US$15.4 billion in the fourth quarter. This was because non-resident investors increased their participation in the country's equity and debt markets.

"The value of transactions in which non-residents participated also increased from 75.5 per cent to 77.4 per cent over the same period, "said the bank.

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