The South African rand has performed well under trying circumstances.
Image: ChatGPT
While the US-Iran peace talks have boosted global business sentiment in the past week, markets appear to be running out of steam this week, and it’s no different for the rand.
Last week’s truce saw the local currency strengthen sharply to R16.31 against the US dollar as global risk appetite improved and Brent crude oil prices fell by 2%, easing local inflation concerns.
However, the rand has been trending weaker since late last week and dipped to R16.50 on Tuesday morning.
The key factor here appears to be a stronger US dollar, as global investors price in a more “hawkish” stance from the US Federal Reserve, which could keep interest rates higher for longer.
However, local concerns are beginning to attract more attention, says Wichard Cilliers, Head of Market Risk at TreasuryONE. These include rising tensions around illegal immigration, slowing growth expectations, and weaker manufacturing conditions.
“For now, global factors remain the dominant driver of USD/ZAR, but any signs of socio-economic instability could quickly see investors demand a higher risk premium on South African assets.”
Despite a weakening rand, South Africa is still on course for the first round of fuel price decreases in July, following the fall in global oil prices.
Although the South African rand has appeared volatile at times, the local currency has largely punched above its weight amid the global turmoil experienced in 2026.
According to Investec Chief Economist Annabel Bishop, the rand has shown some resilience this year despite the drop in global risk appetite. While the US dollar has gained 5.0% since the end of February, the rand is only 3.0% weaker over the same period.
Aiding the rand’s resilience are also the improvement in state finances, credit rating upgrades, and progress on repairing SOEs, Bishop says.
“The establishment of the GNU has been key for SA’s improved investor climate, including opposition to the largest political party’s planned fiscal expansion, which did not go ahead due to strong opposition, with growth-supporting measures instead being adopted,” she added.
Bishop said the local currency has not lost much ground compared to what it would likely have if the investor climate had not strengthened over the past two years.
The rand is now in the top third of emerging market currencies in the Bloomberg EM ranking.
“A favourable debt profile (long maturities, mostly local currency), strong institutions, and a credible monetary framework will continue to support South Africa’s credit ratings and investor climate, and so the rand in the longer term,” Bishop concluded.
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