South Africa's Rand Just About Where It Should Be

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The rand’s REER as measured by the Bank for International Settlements is now equal to its 10-year average, meaning it’s neither over- nor undervalued when benchmarked against a basket of other currencies over the long term.

The South African currency had been undervalued since 2013 before moving into overvalued territory this year as a change in the country’s political leadership and economic outlook spurred an advance in the first quarter. But an emerging-market sell-off since April wiped out those gains, bringing the rand’s REER back to its historical average.

According to this measure, Peru’s sol is the most overvalued emerging-market currency and the Turkish lira the most undervalued. A currency’s REER is the trade-weighted mean exchange rate in relation to a basket of other major currencies, adjusted for inflation.