previously the huge losses from the forward book led to a structural liquidity surplus in the money markets, which had to be mopped up by using expensive instruments such as the so called special money markets swaps, our operations in the money markets now follow what one may refer to as normal central banking patterns. moreover, all these achievements also enabled the bank to focus more on increasing the official reserves to more internationally acceptable levels. what that level is, is rather difficult to say, and there appears to be no universally agreed upon international benchmark in this regard. the appropriate level may need to be evaluated against a country's specific circumstances such as the size of its economy and degree of openness, its exchange rate regime, credit rating, risk of capital flight, and many other factors. extensive research on the subject continues to be undertaken here and internationally. as stated previously, whilst not working toward a specific target for reserves within a specific time frame, the bank is strengthening its reserves mainly by means of purchasing, in a reponsible manner, moderate amounts of foreign exchange in the market, as and when, in our opinion, market conditions permit such purchases without unduly influencing the exchange rate and introducing unnecessary volatility in the market. we continue to accept that the exchange rate is set in the market. from time to time the bank was also supported by the national treasury in the process of accumulating reserves, when the proceeds of foreign bond issuances were sold to the bank in exchange for rand. in addition to " creaming - off " and foreign borrowing by government, the bank also borrows foreign currency in its own name mainly through the syndicated loan market, which increases the level of gross reserves. the international liquidity position has increased to $ 8, 6 billion as at 31 august 2004 and the gross reserves ( including gold reserves of approximately 4 million fine ounces ) increased to slightly more than $ 12 billion at the end of last month. this is indeed a remarkable achievement, when one considers that at the time of our meeting in 2001, the negative nofp stood at us $ 9bn, as indicated earlier. some observers at times blame the bank for not increasing the pace at which it is accumulating foreign exchange reserves. these well'educated and informed'folks sometimes forget that converting a negative nofp position of $ 23, 2 billion in september 1998 into a positive net reserve position of $ 8, 6 billion in august 2004, implies that over this six - year

daniel mminele : policy implications of some key market developments address by mr daniel mminele, deputy governor of the south african reserve bank, at the financial markets department ’ s annual cocktail function, pretoria, 3 march 2015. * * * introduction ladies and gentlemen, good evening. thank you for attending this year ’ s financial markets department cocktail function. it has almost become tradition for me to take stock of major global and domestic market developments that occurred during the past year, and to briefly reflect on their implications for south africa. in the past, we also used this event to brief you, our partners in financial markets and other stakeholders, on key projects undertaken, changes and innovations introduced in the financial markets department. this year, though, i would like to take a slightly different approach. rather than providing a detailed review of operations over the past year, i will look at what i think are potential challenges that market participants and policymakers are likely to be confronted with in the period ahead. given the time constraints, i will focus on the policy implications of some key market developments. you will, however, not be deprived of information about recent developments and activities of our financial markets department. i have the pleasure of announcing the launch of the newsletter called fmd update, copies of which will be available tonight. the newsletter will also be available on the bank ’ s website. what has not changed and will not change is the importance of central bank interaction and communication with the markets, especially in light of the new views on the role of forward guidance in its various forms. forward guidance, in more formal or less formal ways, appears to have graduated from what was essentially a crisis - fighting instrument to now being advocated by some as part of the standard toolkit of central bankers, even in normal times. recent experience has shown how sensitive financial asset prices have become to changes in signals over future policy. we therefore continue to value our ongoing interaction with yourselves as market participants, as you are in essence part of our transmission mechanism of monetary policy. monetary policy divergence, the stronger us dollar, and global imbalances but let me get back to market issues and policy. one of the key trends observed over the last few quarters has been the steady appreciation of the us dollar against the backdrop of divergent monetary policies in advanced economies. at first glance, such a recovery in the us currency seems consistent with the improvement in us economic prospects. us gdp growth continues to outpace that of the eurozone and japan,