The rand was slightly stronger on Tuesday morning‚ recovering from the setback attributed to Public Protector Busisiwe Mkhwebane’s controversial remarks on the Reserve Bank’s mandate.
The local currency dropped as much as 2% to the dollar after Mkhwebane recommended that the bank’s constitutional mandate be amended to promote economic growth rather than to protect the value of the rand.
The central bank has vowed to mount a legal challenge against the recommendation‚ arguing in a statement that Mkhwebane’s remarks fall outside of her mandate.
Rating agencies have previously hailed the independence of the bank as one of the key institutional strengths that count in the country’s favour.
“The risk will be that we push the foreign investor constituency and the rating agencies too far‚ then bonds and the currency will be on the back foot for some time to come‚ but hopefully the market resilience overrides these aberrations and common sense prevails‚” said Ashley Dickinson‚ head of fixed income dealing at Sasfin Securities.
Net foreign inflows have supported the rand‚ keeping a lid on inflation‚ which the bank monitors when deciding on interest rates.
At 9am‚ the rand was at R12.9656 to the dollar‚ from R12.9891. It was at R14.4574 to the euro from R14.4869 and at R16.5203 to the pound from R16.5452.
The euro was at $1.1150 from $1.1149.