Over the passed month we have seen the local currency gain almost 5% against the dollar, the most out of more than 140 currencies tracked by Bloomberg.

While South Africa is one of the worst-performing economies in the emerging-market space from a macro standpoint, the market seems to like the rand which is currently riding the wave of a global risk-on trade spurred on by a weaker dollar, prospects of US stimulus and the global hunt for yield.

In next week's budget speech, Mboweni will have to convince investors he has a credible plan to support an economy that contracted the most in nine decades last year, while also curbing growth in government debt.

As long as the rand remains one of the most liquid emerging-market currencies and the Reserve Bank refrains from intervening and allows it to trade freely, the vicious cycle of spectacular rallies followed by substantial corrections is likely to continue.

The ZAR is currently trading at 14.47/USD

The rand is riding a massive wave that could break over next week’s budget

The rand’s world-beating rally may be blinding traders to risks ahead.

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