certainly, recent experience in south africa suggests that the recovery in the rand over the past year has been an important factor in containing inflation. in part this recovery has reflected the general weakening in the dollar, and factors such as higher commodity prices have also been an influence. but the currency's recovery has also been an important channel by which monetary tightening worked its way through to the economy. if the relationship between interest rates and exchange rate movements were predictable, the effectiveness of the exchange rate transmission channel would be helpful to monetary policy. but in practice this relationship remains rather inscrutable. moreover, the fact that emerging market currencies are subject to volatility resulting from shifts unconnected with the country itself, such as the recent substantial adjustments by the dollar and the euro, means that movements in the exchange rate can have impacts on domestic monetary conditions that can be both large in their effects and impossible to anticipate. of course, it can always be argued that in these circumstances the central bank should try to moderate movements in the exchange rate in greater or less degree. but the instruments available, for example through capital controls or official intervention, if maintained for any period, do not have at all an encouraging track record and may have counter - productive side - effects by impeding desirable structural adjustment or actually increasing exchange rate volatility. the appropriate remedy is to stick to the fundamentals, focusing monetary action determinedly on low inflation while taking into account impacts from the exchange rate as one amongst a range of relevant influences. but it needs to be recognised that these impacts may be particularly significant for emerging market economies. a further distinctive feature is more straightforward, but can easily be overlooked - that policy - makers in emerging market economies tend to have less information available to them about developments in the economy. this is essentially a form of resource constraint. it applies to statistics, where relevant series may be available less frequently, or in less comprehensive or disaggregated form, or simply less reliable. in south africa, what was in origin a relatively minor distortion in the compilation of the cpi produced a downward revision, when it was discovered, of nearly 2 percentage points in the 12 - month rate of inflation. this at least had the merit of being a rare example of a good news shock. such events are not unique to emerging market economies : the uk and others have experienced problems with important statistical series from time to time. but diverting scarce resources to statistical compilation is inevitably a problem in an economy where the

samos system amounted to only r9 billion. this resulted in a liquidity efficiency of 5, 5 per cent. more recently, during 2014, the average values of rand trades that were settled in the cls system on a daily basis amounted to r411 billion. to settle these trades, the average daily liquidity requirement that needed to be paid into the cls system through the samos system amounted to only r8. 7 billion. this resulted in a liquidity efficiency of 2, 1 per cent. thus, in the ten years of south african participation in the cls, the average daily value of transactions settled has increased fivefold, with only a 40 per cent increase in pay - in values. from these statistics it is evident that while our market is benefiting from the risk bis central bankers ’ speeches management mechanism provided by the cls system, there are also huge benefits that we gain from the liquidity efficiency. among the many things highlighted by the global financial crisis was the realisation that there are certain critical, systemically important systems in the international payment and settlement environment which deserve special attention going forward. the cls is one of them, and in this vein we in south africa remain committed to building on our good relationship with the cls and other fellow regulators as well as relevant international bodies, such as the committee on payments and market infrastructures ( cpmi ), to ensure the we continue to strengthen the system further so as to reduce the potential for systemic disruption and financial instability. as you may be aware, we are also actively engaged in implementing cross - border settlement arrangements and systems within the southern african development community ( sadc ), and our experiences from working with the cls are proving quite useful. to our stakeholders in the south african national payment system, the cls group, and, last but not least, my colleagues at the south african reserve bank and other regulators, all the best for the next ten years and more! bis central bankers ’ speeches