Fears that financial turbulence in Turkey were the first sign of broader problems rumbled markets across the emerging world in August, with South Africa one of the hardest-hit. The country has Africa’s most globally-integrated economy and most easily-traded currency, which make it vulnerable to EM shocks. Indeed, the rand was one of the worst-performing currencies across the emerging world in August. A Turkey-style crisis, however, remains unlikely. South Africa’s external position is more stable and its debt levels are much lower. We revised down our end-year exchange rate forecasts, but expect that the rand’s big falls are now behind us.
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