Outlook
The rand is likely to stay range-bound in the near term. It benefits from the SARB’s January rate cut to 8.0% (25 basis points, i.e., 0.25 percentage point) as inflation cools, plus a rebound in key commodities and signs of improved governance. The path higher or lower will hinge on US policy and global risk appetite, and on whether AGOA remains on track for extension through 2028.
Key drivers
- SARB cut in January to 8.0%, first cut since 2020, aided by easing inflation; supports carry and investor sentiment.
- Global commodity price rebound, especially gold, bolstering SA export earnings and the rand.
- Fiscal consolidation and governance improvements boosting investor confidence.
- AGOA extension through 2028 remains pending Senate approval; SA’s inclusion adds political risk to forward rand expectations.
Range
ZAR/USD at 0.062515 is 2.9% above its 3-month average of 0.06076, having traded in a fairly volatile 9.8% range from 0.057851 to 0.063546. ZAR/EUR at 0.052854 is 2.1% above its 3-month average of 0.051745, trading in a 5.8% range from 0.050204 to 0.053110. ZAR/GBP at 0.046216 is 2.5% above its 3-month average of 0.045094, with a 5.2% range from 0.043959 to 0.046253. ZAR/JPY at 9.6491 is 1.8% above its 3-month average of 9.477, trading in an 8.4% range from 9.0634 to 9.8247.
What could change it
- US monetary policy shifts or a stronger dollar could cap rand gains.
- A surprise uptick in SA inflation or renewed fiscal slippage could weigh on the rand.
- Delays or changes to AGOA approval could alter the forward trajectory.
- Global risk sentiment and commodity price volatility could drive further rand moves.
