Tito Mboweni told a parliamentary finance committee that he did not have a target level in mind for the rand but that he would like to see it "much stronger than it is now".

Some economists have argued that the rand's 10% rise against the US dollar so far this year has harmed South Africa's exports-led economy, a view which was reflected in the committee's questions.

Mr Mboweni's testimony coincided with the release of a business confidence survey which revealed that pessimism about the country's economic outlook increased during the April to June three-month period.

Sagging confidence

The business confidence index declined 10 points to 50 points, said the Bureau for Economic Research (BER) and Rand Merchant Bank, who compile the survey in tandem.

The index is based on a survey of 3,000 firms in manufacturing, retail and construction.

Mr Mboweni said he would prefer to see the rand's value stabilise against the dollar but to do so "on the stronger side".

A more predictable exchange rate would reduce uncertainties for exporters.

"We certainly have no intention of weakening the rand. As long as I am governor of the Reserve Bank, that's going to be my position," he said.

The South African currency immediately skipped seven cents higher on the currency markets in response to Tito Mboweni's comments, notching up 7.88 rand to $1.

Weak growth

The South African Reserve Bank delivered its first interest rate reduction in 21 months in June when it cut rates from 13.5% to 12%.

The rate cut aimed to give a boost to the country's sagging growth rates, which dropped to 1.5% in the first three months of 2003 from 2.4% in the final three months of 2002.

Mr Mboweni said then that he was confident inflation - running at 8.3% in April - would continue to decline.

In his parliamentary testimony, he revealed that the committee had been united on the need for an interest rate cut to cheapen the cost of borrowing but divided on how big the reduction should be.

He also said that South Africa is studying the possibility of setting up a single central bank with three of its neighbours - Lesotho, Swaziland and Namibia.

But the plan seems unlikely to materialise: "It is not a bad idea, but I don't think it will fly politically - it's a dead duck," Mr Mboweni said.