Rand defies pressure: US tariffs fail to weaken currency’s surge against the Dollar

The rand is getting stronger thanks to an unlikely ally - US trade tariffs that are making the dollar less attractive and pushing investors toward emerging markets.

The South African currency has been trading around R17.33 to the dollar, benefiting from growing doubts about America's economic dominance.

US tariffs and political pressure on America's central bank are raising questions about whether the dollar deserves its premium status, according to Nolan Wapenaar from Anchor Capital.

"We have seen some of the premium pricing for the dollar dissipate as the world asks these questions," said Wapenaar, the investment firm's co-chief investment officer.

"Tariffs have had an impact which took a little shine off the dollar."

This is creating opportunities for emerging market currencies like the rand as investors look for alternatives.

The US Federal Reserve cut interest rates by 0.25% last week - the first cut since October 2024 - as tariffs start hurting the American economy.

"Last week's easing was met with some relief by financial markets, with concerns having grown about the negative effect of US tariffs on economic growth and employment," said Investec chief economist Annabel Bishop.

Research from Yale University shows the economic damage is significant. US economic growth will be 0.5 percentage points lower each year in 2025 and 2026 because of tariffs – equivalent to losing $120 billion this year.

Markets are betting on two more US rate cuts this year and two more in 2025.

The rand has stayed relatively flat since the Fed rate cut, trading near R17.30 before the central bank meeting and back around that level now, Bishop said.

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Currency strategist Andre Cilliers from TreasuryONE noted the rand "failed to break below the key R17.25 technical level" yesterday but remains in a tight trading range.

The weaker dollar and lower US interest rates are also boosting commodity prices, which helps commodity-producing countries like South Africa.

Gold hit a new record high of $3,778 per ounce on Monday, driven by expectations of more US rate cuts and safe-haven demand.

Oil prices dipped slightly as oversupply concerns outweighed geopolitical tensions.

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