At what level does a currencys volatility become excessive, in a concrete sense? Any claim that an exchange rate is excessively volatile needs a benchmark for normalvariability. We compute variance bounds implied by exchange rate models as the norm, for a set of particularly volatile emerging market currencies; and a
nd that long-run exchange rate volatility does not breach the upper bound implied by the present value of underlying fundamentals for each currency in our sample, except the Brazilian real. However, nominal exchange
rate variances get closer to implied upper bounds under ininflation targeting. We also find a reduction in real exchange rate misalignment under inflation targeting.