The rand’s wild swings whenever there is good or bad news elsewhere in the developing world is due to its status as a proxy for emerging markets (EMs), rather than to domestic factors, said Francois Groepe, the deputy governor of the SA Reserve Bank. The SA currency is about the 16th most-traded currency globally, while the economy ranks at about 32nd or 33rd, Groepe told editors at a lunch in Johannesburg yesterday. Spot turnover in the rand is equivalent to about $4bn daily, while total turnover is as high as $17bn, he said. “There is little doubt that the rand is a proxy because why would you have such a difference in the turnover of the currency relative to the size of the economy?” he said. “Often the currency moves in tandem with what’s happening to other EMs.” The volatility of the rand, due in part to the liquidity of SA’s comparatively deep financial markets, makes forward planning difficult for businesses who pay their costs or derive their revenue in foreign currency. It ...

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