The rand has clawed back recent losses and is now trading comfortably below the R19/$ mark, buoyed by stabilising political dynamics within the government of national unity (GNU) and a retreat in the dollar, economists have said.
The currency was trading at about R18.45 to the dollar on Friday morning — a significant recovery from the R19.93/$ peak recorded last month amid political turmoil surrounding budget talks. The third version of the budget will be tabled on May 21.
Annabel Bishop, chief economist at Investec, attributed the rand’s recovery to easing concerns about the budget and signs that parties in the GNU were working together more smoothly after recent tensions.
“The rand has returned to the forecast for this quarter (R18.60/$), after reaching R19.93/$ early this month on fears the DA would exit the GNU, which worried investors and financial markets, and voters in the polls,” she said.
As investor concerns ease, Bishop said the rand could continue to strengthen, barring any significant global or local shocks.
“At the start of this quarter the rand reached R18.27/$, before the political turmoil of the last few weeks. [It is] likely to strengthen further this month, and indeed over the rest of this quarter.”
However, the rand’s trajectory remained tightly coupled with global risk sentiment.
André Botha, head of execution at TreasuryOne, attributed the recent strengthening to a combination of domestic and international factors.
“Internationally, the weakening of the dollar has enabled the rand to align with its emerging market peers in appreciating against the dollar,” he said.
According to Bishop, the dollar index has dropped back to levels in 2022 when it was recovering from the impact of Covid-19 on the markets.
With signs of relaxation in US-China trade relations also supporting emerging markets, analysts said the rand could continue its positive streak.
“Despite these gains, the rand has not yet returned to its pre-crisis levels, indicating that a risk premium remains embedded in its valuation. Markets continue to exercise caution towards riskier assets such as the rand, reflecting ongoing uncertainties,” Botha said.
He warned that the currency remained headline-sensitive: “The ongoing global tariff disputes continue to dominate international attention, while domestically, the stability of the GNU remains a critical factor. Any negative headlines regarding the GNU could trigger renewed volatility in the rand.”
He said that although US economic indicators, such as inflation and nonfarm payrolls, had temporarily receded in importance, their influence was likely to resurface should they signal a slowdown in the US economy.
“Such developments could further impact the rand’s performance and the broader emerging-market currency landscape.”
“Forecasts, while cautiously optimistic, are subject to change in response to evolving conditions,” Botha said.
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