South African Reserves Drop For First Time in Three Months on Dollar Rally

South African reserves fell for the first time in three months in November as the dollar rallied, reducing the value of holdings of euros, pounds and other foreign currencies.

Gross reserves dropped 1.9 percent to $43.4 billion last month, the Pretoria-based Reserve Bank said in its website today. Net reserves were unchanged at $43.1 billion, the Reserve Bank said on its website today.

The dollar gained last month against all 16 major currencies tracked by Bloomberg, surging 6.2 percent against the euro. That reduced the value of holdings of foreign currencies held in reserves, undermining the central bank as it steps up dollar purchases to meet demands by industry and labor unions for a weaker rand.

“The Reserve Bank has added to reserves, but they’re not being ultra-aggressive,” said Kamilla Golda, an economist at Econometrix Treasury Management in Johannesburg. “We expect the rand to strengthen into next year and that will present an opportunity for the Reserve Bank to continue building reserves.”

The rand was at 6.9014 against the dollar as of 9:09 a.m. in Johannesburg from 6.8763 before the data was released.

Fiscal Help

The Reserve Bank said it bought $655 million in foreign currency last month, helping to limit the drop in reserves. Foreign currency deposits increased by $162 million in November, indicating transfers from the National Treasury to help boost reserves.

The rand has climbed 11 percent against the dollar since the beginning of June, reducing the competitiveness of manufactured exports and adding to job losses. The Congress of South African Trade Unions, the country’s biggest labor federation, has called for lower interest rates and a pegged currency to help boost economic growth in Africa’s largest economy.

The stronger rand has helped to curb inflation, enabling the central bank to cut its benchmark interest rate three times this year to 5.5 percent, the lowest level in 30 years.

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

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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