Outlook
The ZAR remains modestly supported by solid commodity earnings and rate differentials, with the rand trading near modestly stronger levels versus the dollar and other peers. The formation of a centrist Government of National Unity (GNU) has reduced policy uncertainty, supporting sentiment. Ongoing global growth and commodity-price trends, plus domestic fiscal discipline, will be key drivers for near-term moves.
Key drivers
- Global commodity prices: Strong demand for gold, platinum, iron ore, and coal supports export earnings and the rand.
- Monetary policy adjustments: SARB maintains higher interest rates to curb inflation, while the US Federal Reserve’s softer stance has aided the rand.
- Fiscal policy developments: Efforts to shrink the budget deficit and improve public sector efficiency bolster investor confidence.
- Political stability: The GNU’s formation has eased investor concerns and supported rand strength.
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 from 0.057471 to 0.063546. ZAR/EUR is near 0.052077, about 1.6% above its 3-month average of 0.051257, trading within a 14-day range from 0.049907 to 0.053110. ZAR/GBP is near 0.045369, about 1.4% above its 3-month average of 0.04475, within a 14-day range from 0.043864 to 0.046031. ZAR/JPY is around 9.6107, about 2.7% above its 3-month average of 9.3576, with a 14-day range from 8.8735 to 9.8168.
What could change it
- Global growth and commodity price moves: Unexpected rallies or declines in metals and energy prices can shift export earnings and the trade balance.
- U.S. dollar and global risk sentiment: Further shifts in Fed policy expectations or risk appetite can alter USD strength versus the rand.
- Domestic fiscal policy and deficits: New budget developments or reforms affecting government debt dynamics could reprice risk.
- Political stability and policy clarity: Any stress or clarity around policy direction beyond the GNU could influence investor confidence.
