The rand stayed remarkably stable for most of 2005 and started strengthening towards the end of the year, in line with rapidly escalating commodity prices, notably gold and platinum. But it became quite noticeable that the R6/dollar level was a psychological barrier unlikely to be breached for more than a brief period.

With both gold and platinum at new highs in rand terms, it seemed likely that the currency would remain strong. But by late April/early May 2006, it was showing contrary behaviour. There were suggestions - when the rand was showing slight weakness - that the Reserve Bank was buying dollars in the foreign exchange market, when all of a sudden the rand plummeted.

It was especially noticeable against the cross rates - like the euro and sterling - as the dollar was weak at the time.

Even the most optimistic observer would agree that we've seen the best of the rand's remarkable recovery and the only way is down, hopefully in a relatively controlled manner.

Chances of a return to an uncontrolled flight from the currency, as happened in 2002, are low.

Of concern against that sentiment is SA's growing current account deficit.

The deficit is made all the more precarious because the foreign "investment" that's propping it up is capricious. It's mainly portfolio investment, with little or no "hard" foreign fixed investment in the form of bricks and mortar. If a full-scale loss of confidence in emerging markets were to materialise, the rand could be hit quite severely.

Though the rand strength dampened prospects for gold mining companies in 2004, that negativity was more than countered last year by the strength in the gold price, which rose by more than 50% in dollar terms between May 2005 and May 2006.

The rand's recent weakness puts Reserve Bank governor Tito Mboweni in a difficult position.

He's resisted the calls from organised labour to let the currency weaken but now external events have overtaken him.

If he were to keep raising rates to ostensibly dampen consumers' appetite for imported goods but in reality to strengthen the rand, he'd find himself in all sorts of trouble.