n African Finance Journal - The exchange rate exposure of major commercial banks in South Africa




This paper examines the exchange rate exposure of South Africa's major commercial banks with the help of an augmented market model. In contrast to the weak empirical evidence in prior studies done abroad, this study reveals that all the four major banks exhibit significant foreign exchange risk. Our findings indicate that the net foreign currency asset position is a weak predictor of foreign exchange risk. The study sheds light on the averaging and offsetting effect of measuring exposure over an extended period of time. The results offer more evidence about the prevalence of economies of scale in currency risk management.


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