Johannesburg - South African Finance Minister Pravin Gordhan said the rand is trading below its fair value after a sell-off of emerging-market currencies.

The government is monitoring the rand carefully, Gordhan said in a speech in Johannesburg yesterday.

The depreciation in emerging-market currencies is partly an overreaction by financial markets, he said.

The rand slumped 2.5 percent against the dollar to as low as 11.3803 yesterday, with a surprise interest-rate increase by South African policy makers failing to stem its slide.

Emerging-market currencies have come under pressure as the US Federal Reserve reduces its monetary stimulus program that’s helped to fuel capital inflows.

Gordhan said a weaker rand raises import costs while creating opportunities for exporters.

The Reserve Bank increased its benchmark interest rate by half a percentage point to 5.5 percent yesterday as it forecast inflation will breach the 3 percent to 6 percent target by the second quarter.

Turkey more than doubled its key rate at an emergency late-night meeting the day before.

The Fed said yesterday it will cut back its quantitative easing by $10 billion to $65 billion a month.

Mark Mobius, chairman of Templeton Emerging Markets Group, said in an interview yesterday that inflows into developing nations will resume later this year. - Bloomberg News