Outlook
The rand looks set to stay firm near current levels in the near term, supported by strong commodity prices, high SA interest rates, ongoing fiscal consolidation, and political stability. If global growth falters or commodity prices retreat, the rand may come under pressure as the dollar strengthens.
Key drivers
- Global commodity prices and export earnings: Strong demand for South Africa’s gold, platinum, iron ore, and coal improves foreign earnings and supports the rand.
- Monetary policy: The SARB has kept rates high to curb inflation, while markets have priced in a softer dollar environment from the US Federal Reserve’s dovish stance, providing further support for the rand.
- Fiscal policy developments: Deficit reduction and efficiency gains in the public sector bolster investor confidence and underpin rand strength.
- Political stability: The formation of a centrist Government of National Unity has reduced investor concerns and aided the rand’s resilience.
Range
ZAR/USD is at 14-day lows near 0.061340, about 2.4% above its 3-month average of 0.059931, having traded in a 14-day range of 0.057471 to 0.063546. ZAR/EUR is at 14-day lows near 0.052077, about 1.6% above its 3-month average of 0.051257, with a range of 0.049907 to 0.053110. ZAR/GBP is at 0.045369, about 1.4% above its 3-month average of 0.04475, trading within 0.043864 to 0.046031. ZAR/JPY is at 9.6107, about 2.7% above its 3-month average of 9.3576, within a range of 8.8735 to 9.8168.
What could change it
- A shift in global commodity prices (decline would pressure the rand; a further rally would support it).
- Changes in the SARB policy path or unexpected inflation developments (could affect SA yields and appetite for SA assets).
- The trajectory of the US dollar (a stronger dollar would weigh on ZAR; a weaker dollar would lift it).
- Domestic fiscal policy outcomes (further deficit reduction or slower reforms).
- Political developments and policy shifts affecting investor confidence.
- Global risk sentiment and external shocks (geopolitical events, market stress).
