reserve bank not to overreact to exchange rate weakness. too quick a tightening of monetary policy could endanger the growth prospects of south africa and encourage an outflow of capital. this would put greater and more lasting pressure on the exchange rate of the rand with important consequences for inflation. besides, if the factors responsible for the weakness in the exchange rate are taken into consideration it seems unlikely that a tightening of monetary policy would have the desired effect of more stability in the foreign exchange market. the policy stance adopted by the authorities does not imply that the value of the exchange rate is regarded as unimportant when setting monetary policy. on the contrary, the impact of exchange rate changes on inflation is carefully taken into account when managing domestic liquidity and determining the repo rate. if signs do emerge of increased inflationary pressures arising from a depreciation of the exchange rate of the rand, the reserve bank will not hesitate to take appropriate measures. 6. conclusion the domestic financial markets have adjusted in a mature manner to the rise in oil prices, adverse developments in other parts of sub - saharan africa, the strength of the dollar and heightened volatility in international financial markets during the first four months of 2000. had the reserve bank attempted to intervene in the currency market in order to slow the process of adjustment to these events, the success of the intervention would have probably been thwarted if only by the strength of the dollar. moreover, such intervention may well have exacerbated the downward pressure on the value of the rand. the bank accordingly has rather attempted to maintain stability in the domestic money market. in view of the sound underlying economic conditions in the country, we are of the opinion that this is the correct approach to follow and should eventually lead to stable market conditions at the least cost to the country. the bank will nevertheless carefully monitor any further developments in the financial markets. “ we are indeed living in challenging times! ”

per fine ounce, the gold - mining shares declined by 17 % up to the end of april. the general surge internationally in the share prices of the information sector at first supported the prices of these industries in south africa, but information technology share prices weakened markedly from mid - march. although conditions in the share market are still volatile, price movements have shown a distinct upward trend since the middle of april 2000. the increases in share prices were discernible in most of the main sectors. the volatility in the market was responsible for a further sharp increase in the value of shares traded to an all - time high of r155 billion in the first quarter of 2000. in contrast to the unstable conditions in the foreign exchange and capital markets, interest rates in the money market were largely unchanged. for example, the bankers ’ acceptance rate fluctuated in a narrow range of between 9. 83 % and 9. 92 % from the beginning of march, while the rate on interbank funds remained constant at a level of 9. 5 %. the stability in the money market can mainly be ascribed to the monetary policy stance that the reserve bank pursued. 3. factors responsible for uncertainties in markets the factors responsible for the uncertain conditions in our financial markets arose mainly outside the borders of our country and were largely related to perceptions about the effect on south africa of developments in neighbouring countries as well as the strength of the us dollar. in the past week, i have visited london and basel. in the process, i met market participants in london and my colleagues in the central banking fraternity at the bank for international settlements in basel. again and again, it was emphasised that political conflicts in sub - saharan africa were harming investor sentiments, which were not doing south africa and the region any good at all. one person even referred to what he called “ the depressingly present african psychological factor ”. sentiment is an important ingredient in market decisions and public authorities must take cognisance of this. it is clear therefore that conflicts in sierra leone, ethiopia / eritrea, the democratic republic of congo, angola and the management of the land question in zimbabwe have had a major impact on our financial markets. in this connection, and in order to remove any doubts about south africa ’ s position, the president of the republic has committed south africa to supporting the peaceful resolution of these conflicts and lawful processes of land reform. he further assured everyone that south africa ’ s land question will be resolved through an orderly legal and constitutional