The Reserve Bank is still engaging in the foreign exchange market by buying reserves, but more direct intervention by fixing the exchange rate is not on the cards.
The bank said on Friday its gross gold and foreign exchange reserves increased by $131-million to $44.2-billion in October.
The international liquidity position, or net reserves, grew by $2.3-billion to $43.1-billion, largely reflecting the bank's activity in the market.
Gold reserves climbed by $146-million after the gold price increased by $40 per fine ounce in October.
The continuous strengthening of the rand against the US dollar has prompted calls for more aggressive intervention in the foreign exchange market in an effort to mop up the excess offer of dollars flowing into the local bond market.
The Minister of Finance, Pravin Gordhan, has on several occasions said Treasury would help the Reserve Bank to buy reserves if and where it is possible.
Treasury's contribution to the foreign exchange reserves has declined in the past months, however.
The foreign deposits received account, which is Treasury's foreign exchange account at the Reserve Bank, fell by $125-million to $4.2-billion.
Investec economist Kgotso Radira said this could be related to the Reserve Bank's engagement in the swap market.
The bank's forward position increased by more than $2-billion to $3.1-billion, thanks partly to the inflows from the Japanese takeover of Didata to the value of R24.4-billion.
Radira said the forward positions would probably increase as the Reserve Bank stepped up its intervention, given the rand's expected strength after the US Federal Reserve announced its second round of quantitative easing late on Wednesday.
The rand strengthened to below R6.80 against the dollar after the announcement.
However, any talks of a fixed exchange rate still seem far off.
At a conference on monetary policy and fiscal stability on Thursday, Reserve Bank governor Gill Marcus warned that the crisis in the euro area had shown that having a fixed exchange rate mechanism did not imply that a country's international competitiveness was automatically maintained.
"Fixing a nominal exchange rate does not imply real exchange rate stability," Marcus said. "This is a well-known fact, but generally forgotten by the proponents of a fixed exchange rate, including those in SA who view it as the silver bullet to solve the country's problems."
The costs of intervention in the foreign exchange market have been mentioned as an inhibiting factor.
It contributed to the R1.2-billion loss that the Reserve Bank suffered in the 2009-10 financial year.
Desmond Lachman, a professor of economics at Georgetown University in Washington, said at the same conference that cost should not be a reason not to engage in the foreign exchange market.
The real reason why the Reserve Bank would want to be targeting a certain exchange rate to limit volatility was to get a better performance on inflation and better performance on economic growth.
"If you smooth and reduce the volatility of the currency, you are not going to be able to stop the movements on the trend, but you are going to be able to prevent the currency from becoming overly strong and being overly weak," Lachman said.
But the strong rand also offered a window of opportunity as SA could build its reserves for less, he said.
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