Renouncing the “forward book” and allowing the “fear of floating” to wear off over time has limited the extent of foreign-currency borrowing, encouraging the development of our own capital markets and reducing a major risk for non-resident investors in rand assets.2 When a country adopts a floating exchange rate, the reasons for holding foreign reserves also change.
Another source of divergence in the rates of price changes across euro area countries or regions may arise when countries or regions are affected by economic or policy shocks which are different in their nature or timing, or when, due to different economic structures, local economies respond differently to a common shock. One example of this would be a change in the oil price.