Rand Weakness Overdone: Central Bank Governor
The South African rand's volatility is a concern but the weakness of the currency is overdone, the country's central bank governor Gill Marcus told CNBC Friday.
Speaking at the Ambrosetti Workshop in Italy, Marcus said the longer term expectation was fora recovery from the current weak levels.
"Obviously it's a concern; both the level and volatility because that impacts on the way people look at the currency and the opportunities around it, but we think that it's overdone at the moment but it moves in large bands. It's been consistently between 8-8.50 and moved to the 8.50-9 rand level[against the dollar]. We think it could re-trace back to better levels in the medium term," Marcus said.
The rand has weakened significantly this year, falling around 7 percent against the dollar so far this year. It's been dragged down by worries about the fragility of Africa's largest economy and rising fears of inflation. Gloomy data on the country's trade deficit as well as subdued business confidence have hit the economy as it struggles to get past a series of crippling labor strikes in its mining industry.
Marcus added that although the weakness posed a problem, it offered an upside to the broader economy.
"It has the benefit of addressing the appreciation that we've had for some time and [the rand] has been overvalued for a considerable period of time. If it can stabilize between 8-9 rand its good for exports and the manufacturing sector," she said.
Marcus insisted that the independence of the currency from the workings of the central bank would be maintained regardless of the level of the rand.
"We do not target the level of the rand and given that it's an open currency, it's a level which finds itself," she said.