Thursday November 19, 12:59 PM
UPDATE 1-S.Africa's Marcus-no desire to intervene in FX mkt
By Wendell Roelf
CAPE TOWN, Nov 19 (Reuters) - South Africa's central bank Governor Gill Marcus said on Thursday the bank had no duty or desire to intervene in the currency market and it was only active to build its reserves.
'There is no exchange rate that is a perfect rate, and it's not the bank's task or desire to intervene ... in the markets to achieve a particular rate of exchange,' Marcus (NYSE: MCS - news) told parliament's finance committee.
'If you want to intervene people will take you on, that is the lesson of the world and, therefore, we do not look at a particular rate, we do not intervene to achieve a particular rate. We look at the opportunities in the market ... to build reserves,' she added.
The rand has gained more than 20 percent against the dollar this year, raising concerns that its gains would weigh on sectors such as manufacturing. It lost ground on Thursday, though, dipping more than 1.5 percent as the dollar firmed.
The central bank has steadily lifted reserves over the past five years after it brought a long-standing negative position into balance in 2004. Its net reserves rose 2.3 percent to $38.784 billion in October, due to a jump in currency holdings and a higher gold price.
Marcus reiterated recent comments on whether it was viable to try to influence the currency when the main driver of its recent strength was a weak dollar.
'This is not as much a function simply of the rand, it's a function of the dollar. You've got a very weak dollar, so to what degree can you actually interact and deal with a weak dollar?' she said.
'You have to then look very carefully at whether you think you've got to do things about it that are sustainable and not are actually not going to weaken your economy.'
CBANK MANDATE
Marcus also repeated she was willing to discuss broadening the central bank's mandate beyond targeting inflation.
'The fact that there is concern and a request to discuss the mandate, is something that we are very ready and willing to engage with people to understand their concerns ... and to go there with an open mind,' she said.
The ANC agreed with its allies, labour federation COSATU and the communist party, to review the central bank's mandate, possibly widening it to take into account growth and jobs.
COSATU and the communist party say efforts to keep inflation within a 3 and 6 percent band have hurt the poor through relatively high interest rates.
The central bank has said it did take broader economic conditions into account when it cut rates this year.
It reduced the repo rate by 5 percentage points between December and August, despite inflation being outside the band. CPI (NYSE: CPY - news) stood at 6.1 percent year-on-year in September.
COSATU wants more cuts, arguing a 7 percent base rate is still too high as the economy remains in recession and is leaking jobs.
After chairing her first monetary policy committee (MPC (A050540.KQ - news) ) meeting this week, which held rates, Marcus said she was not politically bound to anyone.
On Thursday, she said being independent did not mean one is opposed to other opinions.
The central bank's senior deputy research head, Brian Kahn, said food price pressures, previously a key driver of inflation, had trended lower, helping cool inflation.
'It's (food inflation) now at the point where it is actually pulling down on average inflation ... we expect that trend to continue for the months going forward,' said Kahn, an MPC member.
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