While the tighter credit risked slowing South Africa's economic growth, which has already been hurt by falling commodity prices, it bolstered the rand by making rand-denominated assets more attractive to international investors. The currency closed here Tuesday at 17.04 cents, up from an all-time low of 16.26 cents at midday on Monday. Until last week, the rand had actually outperformed the currencies of Asia, Brazil, Australia, and New Zealand with which it is often compared because of similarities in the countries' economies. Economists universally expressed surprise at the fierceness of the attack because the South African economy's fundamentals are strong, whether compared with Asian economies or with the situation here before the 1994 elections. South African banks are very conservative, carry few bad loans and are not in thrall to ruling families like the Suhartos in Indonesia.
Foreign debt is low.
State assets are being privatized, albeit slowly. Until the run began, inflation was down significantly, to 5 percent, the Reserve Bank had reserves equal to three months' imports, and the prime rate was high but stable at about 18 percent. Foreign bankers generally applaud the government's economic policies, which focus on beating inflation and lowering the budget deficit. It is not clear what started this run on the rand. Chris Stals, the governor of the Reserve Bank, has blamed selling by an unidentified American hedge fund.