THE rand's volatility is a concern as it is linked to short-term capital inflows and outflows for South Africa, Finance Minister Pravin Gordhan says.
The currency sank to a near four-year low at R9.18 to the dollar last week in response to investors' concern about mining unrest as well as South Africa's ballooning trade deficit.
Its depreciation of more than 7% against the dollar so far this year is viewed as helpful to the manufacturing sector‚ as it makes South Africa's exports more competitive on global markets.
But it also fans inflation‚ which is set to breach its official 3% to 6% target range later this year.
At a conference yesterday, Gordhan sidestepped a question about whether he was concerned.
"On the currency generally whoever we talk to doesn't want to see the kind of volatility we see at the moment‚" Gordhan told a Bank of America Merrill Lynch investment conference.
"The way in which sentiment currently works is the possibility of rapid short-term inflows and outflows ... in our case we want to see more stability in our environment and less fluctuation so that we can see economic certainty for our businesses."
But Gordhan said he was not worried about South Africa's ability to attract capital inflows‚ which are needed to finance the country's current account deficit.
The main concern at present was to boost economic growth‚ which was increasingly a focus of credit rating agencies‚ he said. – BDlive
