Statement issued by Dr C.L. Stals, Governor of the South African Reserve Bank, on the changes in the Bank's gold and foreign exchange reserves during the month of February 1996Please see statement of Assets and Liabilities for January 1996Assets and Liabilities - February 1996 The gross (and net) gold and foreign exchange reserves held by the Reserve Bank declined by R733,9 million from R15 450,7 million on 1996-01-31 to R14 716,8 million on 1996-02-29. The decline over the month as a whole is, however, misleading as the total foreign reserves first increased by R341 million during the first fifteen days of the month, before declining by R1 075 million from 16 to 29 February. These changes in the Bank's total foreign reserves during the course of the month partly reflected its inter-vention operations in the market -- first as a net buyer of foreign exchange when net capital inflows exerted upward pressure on the exchange rate of the rand, and then, as from Friday, 16 February, as a net seller of foreign exchange when large-scale speculative transactions disrupted the market. The Bank already switched from being a net buyer to being a net seller during the morning of 16 February, when the exchange rate of the rand against the US dollar moved from R3,6670 per US dollar through R3,6950, and continued to supply the market throughout the day with more dollars in order to provide sufficient liquidity to a very speculative market that fell in disarray because of the unfortunate combination of a number of unfounded rumours. In total, the Reserve Bank sold US $483 million (equal to R1 803 million) on that day in supporting the market. During the subsequent period, that is from Monday the 19th up to the end of February, the Reserve Bank remained a net seller of dollars in the spot market, although the Bank was at times also offered dollars by the market. In total, the Bank's net support to the spot market in the form of deliberate intervention sales of dollars, amounted to US $1 379 million (equivalent to R5 298 million) over the period 1996-02-16 to 1996-02-29. A significant part of these spot sales, however, flowed back to the Reserve Bank in other transactions, and particularly in forward foreign exchange swop transactions. The Reserve Bank also became more active again in the forward foreign exchange market as a consequence of its efforts to maintain some stability in the market. By the middle of February, the Bank's total net oversold forward plus spot foreign exchange position (that is, forward sales minus forward purchases and minus net gold and foreign exchange reserves), had declined to US $6 840 million. From 15 to 29 February, when the Bank intervened in the spot and the forward market by offering US dollars to provide support to the ailing rand, the net oversold position rose by US $1 306 million to a total of US $8 146 million on 1996-02-29. A substantial part of the Bank's support for the market was therefore reflected in the increase in the Bank's forward sales of dollars.It should be noted that the exchange rate of the rand, measured against all other foreign currencies and not only against the United States dollar, has become more volatile in recent times. For example, from 1994-12-31 to 1995-05-31, the average weighted value of the rand against a basket of the currencies of South Africa's major trading partners depreciated by 7,6 per cent. During the seven months from 1995-05-31 to 1995-12-31, however, the effective exchange rate of the rand appreciated by 4,4 per cent, and during the first six weeks of 1996, by a further 1,3 per cent. On 1996-02-15, the average weighted value of the rand was indeed 5,1 per cent above the level of 1995-05-31. After the sharp downward adjustment in the last fourteen days of February, the average weighted value of the rand, on a net basis, showed a depreciation of 4,5 per cent from 1995-12-31, to bring the external value of the rand more or less back to its level as at 1995-05-31. Over the past fourteen months, that is from 1994-12-31 to 1996-02-29, the effective exchange rate of