The result has been renewed global appetite for risk, leading to currency appreciation for most of the emerging markets which had previously experienced weakening exchange rates. Domestic factors seem to have played only a supporting role in driving emerging market currency movements over this period.
In South Africa, markets appear to have welcomed the responsiveness of monetary policy to rising inflation; the current account deficit also narrowed somewhat in the last quarter of 2013. But South Africa’s economic fundamentals have on the whole not changed substantially, nor have markets assessed them differently: the current account deficit remains over 5% of GDP and growth has deteriorated.