Rand Strengthens as Government Won’t Intervene

The South African rand advanced as the South African officials said that they’re not planning a particular rate of exchange for the currency and are more worried about a depreciation than about an appreciation.

Central bank’s Governor Gill Marcus said:

The objective for us is to address the volatility of the currency and we do not target a particular rate of exchange.

Finance Minister Pravin Gordhan said that a sharp depreciation of the nation’s currency can spur inflation and harm the nation’s economy. The Prime Minister surprised analysts as he predicted a budget deficit of 5.3 percent for the fiscal year through March 2012, the same estimate as for the current year.

The rand jumped 42 percent versus the US dollar in the two years through December 2010, boosted by the near-zero interest rates. The currency dropped 7.6 percent, though, in January, the biggest monthly drop since October 2008, as the tensions in North Africa diminished appeal for emerging-market assets.

USD/ZAR traded at 7.116 today as of 6:22 GMT after it opened yesterday at 7.157, dropped to 7.055 and closed at 7.106.

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