Rand joins elite currencies
20 December 2004
The rand, the world's most actively traded emerging market currency, has joined an elite club of 15 currencies where forex transactions are settled immediately, lowering the risks of transacting across time zones.
Other newcomers to the global settlement system are the Hong Kong dollar, the Korean won and the New Zealand dollar.
Analysts say the global settlement system - or the Continuous Linked Settlement (CLS) - will boost investor confidence in the rand, making forex trading safer and giving foreign investors peace of mind.
Through the system, forex trading is settled in real time through the New York-based Continuous Linked Settlement Bank.
According to Business Day, this eliminates the risk for payment delays and scraps the old system of transacting through a network of secondary banks.
CLS Bank, registered in the United States, operates as a multi-currency bank. It holds a settlement account in the South African Multiple Option Settlement system of the SA Reserve Bank.
Legislation allowing for the inclusion of the rand in CLS Bank's multi-currency system was adopted by the National Assembly in September.
Addressing Parliament at the time, Finance Minister Trevor Manuel said the strength of South Africa's financial system had undoubtedly been a key component of the positive real economic growth of the past few years.
However, he said, maintaining this financial stability was an ongoing task.
South Africa's banking system would receive the risk-management, liquidity and efficiency benefits of the CLS system, Manuel told Parliament.
"The inclusion, furthermore, demonstrates that the South African payment system provides for global best practice, and would foster domestic and international investor confidence in the integrity and robustness of the national payment system."
SouthAfrica.info reporter
