{"id":1942,"date":"2025-03-20T07:14:36","date_gmt":"2025-03-20T07:14:36","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=1942"},"modified":"2026-03-18T11:46:06","modified_gmt":"2026-03-18T11:46:06","slug":"the-truth-behind-the-stronger-rand","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2025\/03\/20\/the-truth-behind-the-stronger-rand\/","title":{"rendered":"The truth behind the stronger rand"},"content":{"rendered":"

\"\"<\/p>\n

The rand has remained remarkably stable during what has been a fairly chaotic first quarter of 2025, but economists warn that this doesn\u2019t reflect that all is well in South Africa.<\/p>\n

Despite global market turmoil and local uncertainty around the 2025 budget, the rand has remained stable, even strengthening against the dollar after tanking at the end of 2024.<\/p>\n

This has caused some confusion among South Africans, who are more accustomed to the local unit taking a hit during times of volatility.<\/p>\n

While it is still a far stretch from the near-R17 to the dollar levels seen after the formation of the Government of National Unity (GNU) and before US President Donald Trump was elected in November 2024, the rand has been relatively stable around the R18.20\/$ levels this year.<\/p>\n

It has remained firm in the face of Trump\u2019s trade war with US allies, direct attacks on South African policies from Washington, executive orders pulling US funding from the country, the return of load shedding, and infighting among the GNU over the 2025 budget.<\/p>\n

According to the Bureau for Economic Research (BER), while this may seem like an anomaly, it aligns with global trends.<\/p>\n

The group noted that many currencies\u2014especially emerging market currencies like the rand\u2014have been doing better against the US dollar since the start of the year.<\/p>\n

This is because of the \u201cweak dollar\u201d story\u00a0<\/strong>that has played out as global investors adjust their expectations around US monetary policy and the US economy, which is highly uncertain.<\/p>\n

Importantly, \u201cwhile the rand looks strong, this isn\u2019t necessarily a reflection of South Africa\u2019s economic health,\u201d the BER said.<\/p>\n

\u201cIn fact, South Africa\u2019s risk premium has been climbing steadily since mid-December, and recent surges in 10-year bonds signal that investors remain cautious.\u201d<\/p>\n

South Africa\u2019s relatively high interest rates also make the rand an attractive currency for yield-seeking investors, the BER said\u2014and this looks to remain the case as the Reserve Bank is expected to cut rates less than the US Fed.<\/p>\n

The Reserve Bank\u2019s Monetary Policy Committee is expected to announce its latest interest rate move on Thursday (20 March), with\u00a0many expecting a hold on rates<\/strong>.<\/p>\n

But these positives for the rand won\u2019t last forever, with the BER projecting a depreciating trend to hit by 2026 as inflation, interest rate differentials and external account pressures start to land.<\/p>\n

What is really driving the rand<\/h3>\n

\"\"<\/p>\n

The BER said the ultimate story for the rand in 2025 is that it\u2019s a tale being told outside of South Africa.<\/p>\n

The\u00a0driving force of the local currency is sitting in the US and in global markets<\/strong>, where South Africa is an almost passive benefactor.<\/p>\n

The economists noted that South Africa has historically benefitted from certain types of global crises, especially those that drive up commodity prices.<\/p>\n

\u201cDuring periods of global uncertainty, investors flock to gold as a safe-haven asset. This, in turn, boosts South Africa\u2019s mining sector,\u201d the BER said.<\/p>\n

This creates a positive feedback loop, increasing export revenue and generating higher tax receipts.<\/p>\n

While South Africa\u2019s mining sector is in decline, gold still plays a big role in the economy.<\/p>\n

Gold miners, like Harmony Gold, are a testament to this, with the group seeing dold revenue for the six month period ending December 2024 increasing by 19%.<\/p>\n

The rise in gold prices can act as an economic buffer against potential crises like political instability, higher inflation or budget shortfalls for a time, the BER said.<\/p>\n

It also boosts investment and investor sentiment. However, this are short-term benefits, and the long-term reality will eventually set in.<\/p>\n

As such, the BER warned that South Africa\u2019s economy is in a delicate balance, with the performance of the rand, gold prices and geopolitical dynamics all pushing and pulling at once.<\/p>\n

The economists said that the country needs to ensure sound policies and long-term growth strategies are in place to ensure that South Africa can weather the storms and not be subject to volatile external forces.<\/p>\n

\u201cStructural reforms, diversification of trade partners, and strategic investments in sectors beyond gold will be essential for ensuring that South Africa can build resilience in a rapidly changing global landscape,\u201d it said.<\/p>\n

Credit: Businesstech.co.za<\/a><\/h6>\n","protected":false},"excerpt":{"rendered":"

The rand has remained remarkably stable during what has been a fairly chaotic first quarter of 2025, but economists warn that this doesn\u2019t reflect that…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1942","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1942","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1942"}],"version-history":[{"count":3,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1942\/revisions"}],"predecessor-version":[{"id":1947,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1942\/revisions\/1947"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1942"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}