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South Africans are inclined to regard the highly variable foreign exchange value of the rand as a deep mystery. Yet there is nothing mysterious about the currency’s behaviour.

The daily dollar value of a rand has been closely tied to the value of other emerging market currencies ever since 1995, when SA opened up to global capital flows. When the ratio trends above or below the emerging market line the direction of the rand predictably reverts back to the average relationship of one to one. We have done no worse or better against the US dollar than the average emerging market economy...

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