Johannesburg - The rand's "disproportionately strong decline" over the past month implies there are factors at work beyond emerging market jitters and geopolitical tensions.
This comment came from Nedbank group chief economist Dennis Dykes, writing in the bank's monthly currency analysis, released yesterday.
The local unit, which has fallen 5.3 percent against a trade-weighted basket of currencies in the past month, was falling in tandem with the Turkish lira, but the "fundamentals appear very different".
Though both countries had "large current account deficits, South Africa's debt is smaller and debt servicing is unlikely to be a problem, in contrast to Turkey, where there are perennial problems", said Dykes.
The Reserve Bank said recently that South Africa's foreign debt as a ratio of gross domestic product was at 20 percent in the first quarter of this year.
This compares favourably with most developing economies. Regional ratios, published in the bank's latest quarterly bulletin, ranged from 21 percent in developing Asia to nearly 50 percent in central and eastern Europe.
But Dykes said the rand had "done badly in relative and absolute terms since early May.
"Ironically, it has fallen against currencies where current account deficits have been entrenched for many years and in many cases are higher than South Africa's. The US, New Zealand and Australia fall firmly into this category," said Dykes.
And the rand's weakness has persisted despite a strong rally in precious metal prices.
"After peaking at over $730 an ounce in mid-May, the gold price fell to $550 an ounce by mid-June. However, it has since recouped more than half its losses, rising steadily towards $660 an ounce on geopolitical tensions.
"Platinum has followed a similar pattern. Together, the metals make up about one-fifth of exports."
Dykes suggested that one possibility for the disproportionate decline was that "the pullback from 2001's undervalued position was overdone and that some correction was desirable to help exporter competitiveness.
"Another is that South Africa is a barometer of global expectations and that the rand is a liquid play for all emerging market currencies.
"Both of these are probably true to some extent."
By one measure of valuation, the real exchange rate (with the effect of inflation removed from market exchange rates), any overvaluation "is a thing of the past, so further declines do not seem necessary", said Dykes.
"But on another measure, the currency's woes are unlikely to be over. The rise in the oil price, escalating tensions in the Middle East, correcting asset markets and tough central bank policies all make the global economy, and therefore its proxies, more vulnerable."
At 5pm yesterday the rand was bid at R7.1945 a dollar.