Since early 2005, when the rand/US$ rate hit around 5,60, the rand has been weakening gradually. It took a major knock in mid to late 2006 but recovered strongly to end the year at around R7 to the greenback. But the main factor that ignited concern for the rand - the growing current account deficit - has grown more acute.

The rand fell by 30% between May 11 and October 5 2005, a move that was manifestly overdone. The currency retraced about 11% of the fall and has traded in a fairly narrow 6,90-7,50 band since then.

At the time (May 2006) SA was being associated with emerging-market economies like Hungary and Turkey that also had large and growing current account deficits. Interestingly Iceland, by no means an emerging market, was also a concern, with a deficit approaching 20%. But the rand, along with the Brazilian Real, is the only really tradable emerging market currency and so took a disproportionate knock.

SA Reserve Bank governor Tito Mboweni has resisted calls to increase short-term rates, a move that would undoubtedly bolster the rand. But as the economy gathers strength he may be unable to resist any further.

The last figure for the deficit - 6,8% as at December 2006 - was well above economists' expectations. Many economists are referring to it as being a "good" deficit, as the imports appear to relate largely to essential capital goods, rather than consumer durables and semidurables.

Given government's commitment to infrastructure spending - more than R400bn - over the next few years, it's not surprising that the stock of capital goods has to be replenished. And the fact that government has effectively been on an investment "strike" for 20 years means this stock has become seriously depleted. So the current account deficit is likely to remain in place for some time. This will keep the rand under pressure, especially if emerging market investors become nervous.

But capital inflows, in the form of foreign portfolio investments, are healthy and likely to remain so. This should ensure that any substantial weakness in the currency is only temporary.