Nov. 6 (Bloomberg) -- South African foreign currency reserves increased at a slower pace in October than the previous month, even as a surge in the rand threatened to delay an economic recovery.

Gross gold and foreign currency reserves rose 1.7 percent to $39.8 billion, after gaining 3.1 percent in September, the Pretoria-based South African Reserve Bank said on its Web site today. Net reserves climbed to $38.8 billion from $37.9 billion.

The Reserve Bank hasn’t increased the pace of dollar purchases even after outgoing Governor Tito Mboweni and Finance Minister Pravin Gordhan complained that the rand’s gains may hurt the economy. Reserves have been boosted since May mainly because of proceeds from the sale of a global bond and after the International Monetary Fund allocated funds to member nations as part of a plan to support global liquidity.

“It is surprising that with the rand being relatively strong, the Reserve Bank hasn’t made more use of this,” said Salomi Odendaal, an economist at Citadel Investment Services in Cape Town. “Export sectors are suffering from the strength of the rand. It seems the authorities are more willing to talk the rand down than to act.”

Gordhan said on Oct. 28 the rand was “too strong” and the National Treasury will help the central bank accumulate more reserves to “massage the rand back to where it could go.” Reserve Bank Deputy Governor Daniel Mminele said on Nov. 3 that while the bank will buy dollars “when market conditions are conducive,” it wasn’t targeting a level of the currency.

Rand Strength

The rand jumped to 7.2365 against the dollar on Oct. 14, the highest in more than 14 months, as the price of gold and platinum, South Africa’s biggest exports, climbed. The rand has gained 24 percent against the dollar this year, the third-best performer of 16 major currencies tracked by Bloomberg. It gained as much as 0.7 percent to 7.5402 against the dollar today and was trading at 7.5769 as of 3:45 p.m. in Johannesburg.

The stronger rand may hinder a recovery in the economy, which is in its first recession in 17 years. Gross domestic product fell for a third consecutive quarter in the three months through June, dropping an annualized 3 percent.

Gold reserves jumped 4 percent to $4.2 billion in October from the previous month, the Reserve Bank said. The gold price rose 4.6 percent to an average of $1,045.02 an ounce last month.

Gross reserves were expected to climb to $40.1 billion in October, according to the median estimate of six economists surveyed by Bloomberg.

To contact the reporter on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net.

Last Updated: November 6, 2009 09:06 EST