South Africa will diversify its currency reserves by investing in the Korean won, the Australian dollar and the New Zealand dollar, according to South African Reserve Bank Deputy Governor Daniel Mminele.
The bank will also start investing in covered bonds and mortgage-backed securities as well as trade in bond futures. A portion of the SARB’s $45.8 billion in net reserves will also be invested in the Chinese interbank bond market.
While the moves may be prudent and help to offset some volatility in both the economy and the rand, it will be more interesting over the long term to see how one of the premier emerging market economies fares in its undertakings. These are not unsophisticated moves and for a small economy with limited resources and reserves quite challenging.