THE net open foreign currency position (NOFP), which measures the Reserve Bank's uncovered liabilities in the forward currency market, could be a thing of the past by the third quarter of this year.
Speaking after the release of the Reserve Bank's gross gold and foreign exchange reserve data for January yesterday, Standard Bank economist Goolam Ballim said the NOFP could be unwound faster than the market expected.
He said the position, widely cited as a key structural cause of the rand's weakness, was likely to have fallen from $4,8bn in December to 3bn at the end of last month, and would fall further as government raises more foreign debt.
'Given the increased penchant by foreigners for domestic foreign currency debt, government will probably issue further loans in the new fiscal year,' said Ballim.
'In January, the foreign exchange inflows from the sale of government's remaining stake in M-Cell and the issue of further currency loans will, in all likelihood, have been used to unwind the NOFP,' said Ballim.
Gross rand reserves have increased steadily since the beginning of last year due to the valuation effect of the rand's weakness.
But data released yesterday showed gross reserves in rands declined last month, mainly as a result of the currency staging a minor comeback compared to the lows it hit in December. The gross reserves now stand at R85,2bn, down from R90,5bn in December.
But, once again, reserves in dollars, a vital measure for any central bank, remained static, and were at the same level as in January 2001, at 7,5bn.
The market is now looking forward to the February reserves data, or the January NOFP data to see what the effect of the M-Cell transaction will be.
Net reserves stood at $3,6bn in December, from $5bn in January of last year.
Publisher: Business Day
Source: Capital Markets Reporter
THE net open foreign currency position (NOFP), which measures the Reserve Bank's uncovered liabilities in the forward currency market, could be a thing of the past by the third quarter of this year.
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