Rand remains steady below R18 as dollar weakens due to US trade tensions

The South African rand maintained its position below R18 against the US dollar on Monday, buoyed by a weakening greenback as investors reacted to US President Donald Trump’s renewed focus on trade tensions with Europe.

The rand traded at R17.82 to the dollar in morning sessions, benefiting from a broader decline in the US currency, which softened after Trump threatened Europe with 50% tariffs and criticised the region on social media. By 4.30pm the rand was at R17.87 to the dollar, 0.2% up.

“The dollar’s weakness stems from investors shifting away from U.S. assets amid heightened trade rhetoric,” said Bianca Botes, a director at Citadel Global. The rand, however, remained stable against other major currencies, trading at R24.11 to the pound and R20.32 to the euro.

Market participants await the South African Monetary Policy Committee rate decision later this week, with some economists seeing room for a 25 basis point cut, supported by subdued inflation at 2.8% in April, below the SA Reserve Bank’s 3 - 6% target. 

Annabel Bishop, the chief economist at Investec, noted that the dollar has retreated from recent highs due to concerns over proposed US tariffs and a perceived preference by Trump for a weaker dollar to bolster trade competitiveness.

“Reports suggest the US is seeking to weaken the dollar, which has strengthened currencies like the yen and supported gains in others, including the rand,” Bishop said.

Since mid-January, when the dollar index stood at 110.0, it has fallen to 98.9, driving the rand’s appreciation from R19.23 to R17.81 against the dollar. However, this strength is largely confined to the dollar, with the rand weakening against the euro (from R19.51 to R20.37) and the pound (from R23.23 to R24.26) over the same period, reflecting the rand’s reliance on dollar dynamics rather than inherent strength, Bishop added.

Elsewhere, the British pound rose 0.13% to $1.3558 (R32.84), hovering near its highest level since early 2022, according to Reuters data.

South African Markets Rally on Policy Wins

South Africa’s stock market continued its upward trajectory, fueled by growing investor confidence following key policy developments. The All Share index closed 93 724.31 points higher, up 0.21%.

A recent meeting between President Cyril Ramaphosa and Trump yielded an agreement to negotiate on critical minerals, a vital sector for South Africa’s economic growth, according to Trading Economics. Additionally, parliamentary approval of Finance Minister Enoch Godongwana’s budget has eased political risks, further bolstering market sentiment.

The South Africa Stock Market Index (Composite) has risen 3.64% over the past four weeks and 18.56% over the past 12 months, Trading Economics reported, reflecting sustained optimism in the country’s economic outlook.

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