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South Africa’s central bank Governor Lesetja Kganyago said on Thursday that the bank would not step in to protect the local currency despite its current weakness and that the rand was caught up in a realignment of global currencies.
Kganyago told a webinar that the bank was only concerned about the currency to the extent that it fed into inflation and would not take any measures to defend it.
“It’s a futile exercise trying to defend the exchange rate,” Kganyago said.
The rand has weakened about 13% against the greenback this year.
Nonetheless, Kganyago said the bank’s main concern remained fighting inflation, reiterating that risks to the inflation outlook included food prices, oil prices and exchange-rate moves.
South Africa’s consumer inflation edged up to 4.8% year-on-year in August from 4.7% in July, but it still remains comfortably within the central bank’s target range of between 3%-6%.
The South African Reserve Bank (SARB) kept its main lending rate unchanged at 8.25% at its last meeting in September and Kganyago has been reluctant to suggest that rates may soon start to fall.
“I wouldn’t say inflation is going to be volatile, but it may remain higher for longer than we think,” said Kganyago.
The SARB will have its final monetary policy committee meeting in November.
Reporting by Kopano Gumbi Writing by Tannur Anders Editing by Alexander Winning and Bernadette Baum