WASHINGTON: South Africa's depreciating currency has so far had little impact on inflation and a floating exchange rate is an important shock absorber for the country, the International Monetary Fund said on Monday.
South Africa's rand currency, stock and bond markets sold off last week but regained ground after the appointment of a new finance minister on Sunday.
"We are monitoring financial markets developments and we believe that the floating exchange rate remains an important shock-absorbing mechanism for South Africa," an IMF spokesman said in an emailed statement, in response to a query from Reuters.
"A further depreciation might lead to an increase in inflation, but the pass-through of the depreciation to inflation has so far been modest."
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