The rand came within a whisker of breaching R20/$ on Wednesday as escalating global trade tension and mounting political uncertainty at home saw investors shunning the currency in favour of physical assets, gold in particular.
The rand reached an intraday weakest of R19.93, just shy of its record worst of R20.0066/$ recorded in May 2023, according to Iress data.
It also flirted with a fresh low against the pound, reaching an intraday low of R25.47/£, not far from its record worst of R25.82/£ in 2016 when a toxic mix of Brexit, Donald Tump’s first win in the US election and the Jacob Zuma presidency heaped pressure on local markets.
The local currency recorded its worst level against the euro on Wednesday, breaching R22/€.
Global markets have been rattled by the latest salvo in the US-China trade war. US President Donald Trump imposed a sweeping 104% tariff on Chinese imports early on Wednesday, intensifying fears of a full-scale economic war between the world’s two largest economies.
“The offshore yuan climbed towards 7.38/$ on Wednesday, rebounding from three consecutive sessions of losses, supported by a depreciating dollar,” Trading Economics said in a note.
The trade war is already buffeting global asset prices. According to Reuters, gold surged above $3,090/oz as investors sought safe-haven assets, while oil prices slumped to four-year lows.
The rand’s performance is also being dragged down by mounting domestic instability. According to Investec chief economist Annabel Bishop, political uncertainty surrounding the potential collapse of the government of national unity (GNU) is deeply unsettling to the markets. The possibility of a DA exit from the coalition with the ANC has raised red flags for investors.
She said the DA’s withdrawal from the coalition government could result in the rand weakening to R21/$ and even beyond, depending on which political parties replaced it in the GNU.
Old Mutual group chief economist Johann Els has revised his growth forecast for SA in response to expected softness in US-linked exports but said he did not foresee a local recession.
“Precious metals, base metals and vehicles comprise the bulk of SA exports to the US, with precious and some base metals notably exempt from the new tariffs,” Els said.
“Imports from the US are concentrated in machinery, electrical goods and chemicals. As a result, the macroeconomic impact on SA is likely to be felt more acutely in specific industries such as agriculture and vehicle manufacturing, rather than across the broader economy.
“China and the euro area, SA’s primary trading partners, are expected to adopt accommodative policy stances, which should help offset lost momentum. Inflation risks have also shifted to the downside, supported by stable oil prices. If inflation dips below 3% in the second quarter and the global rate cycle turns, the Reserve Bank may find room to begin cutting interest rates from midyear.”
Els forecasts the US is headed for recession from a combination of sentiment shocks, declining household wealth and higher import costs. He said the Federal Reserve is expected to hold rates steady at the May federal open market committee meeting but could initiate a rate-cutting cycle from June onward, potentially delivering up to 125 basis points in cuts over the remainder of 2025.
Note: April 9 2025
This story has been updated with the most recent data from Iress.
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