The rise in precious metals prices has provided support to the rand while the currency experienced some weakness – particularly in May – due to the repricing of emerging-market risk. The currency depreciated to levels around R6,60 to the dollar in mid-May from levels of around R6,00 to the dollar at the beginning of the year.
The weakening of the currency was essentially due to the sell-off in emerging–market assets in May 2006. The rand depreciated further in June in response to concerns about adverse developments in the current account of the balance of payments. Unlike many of the other commodity producing countries, South Africa has a deficit on its current account, which increases the country’s vulnerability to currency movements.