Rand smashes through major roadblock
The South African rand continued its rally on Wednesday (28 January), hitting R15.80 to the dollar as global markets eye key interest rate moves this week.
The rally is a continuation of the renewed strength the currency experienced in the first month of the year, driven by a weakening dollar and global investors piling into gold.
Gold surged through the $5,200 mark for the first time on record, rising more than 3% on Tuesday and trading around $5,283/ounce on Wednesday.
According to Citadel Global director Bianca Botes, the move into gold is being driven by a sharp sell-off in the dollar, which slid to its weakest levels since early 2022 after President Trump signalled comfort with a weaker currency.
“The softer dollar and surging gold prices have been a strong tailwind for the rand, which is now up around 3% over the past week,” she said.
The rand is also being supported by other positive local data.
Investors looked at South Africa’s composite leading business cycle indicator for November, which rose by 1.4% month-on-month.
The indicator collects data on vehicle sales, business confidence, money supply and other factors to gauge the outlook for the South African economy.
The rand broke through the key resistance level of R16/$ earlier this week, putting it in territory where further strengthening was possible.
The R16/$ level is seen as a significant psychological roadblock, with markets seeing it as a ‘fair value’ position for the rand, given its risk premium and economic fundamentals.
On a purchasing-power basis, the rand should be trading closer to R13/$, but given low economic growth, high debt and other entrenched challenges, the country carries investment risks.
After dipping below R16/$ briefly, the unit held a sustained position below that level as gold and other precious metals exports, such as platinum, hit record highs.
The strengthening continued, moving past R15.90 on Tuesday, and touching R15.78 on Wednesday. By 11h30 on Wednesday, the rand was trading at R15.86/$.
Investec Chief Economist Annabel Bishop noted that the rand’s current rally is remarkable as much of it is being driven on its own terms.
While the rand posted standout gains against the dollar in 2025, its overall strength was driven by a weaker dollar.
Further, the rand didn’t strengthen as much as the dollar weakened, so it still lost value in real terms. However, 2026 is painting a very different picture so far.
“The rand has gained 3.1% this year against the US dollar, while the US dollar is -1.1% weaker in comparison, meaning the domestic currency has appreciated by 2.0% this year on its own,” she said.
Interest rate decision incoming
However, much of the sustained strength is coming from markets taking a wait-and-see stance ahead of central bank interest rate moves, including the US Fed.
“All eyes are on the Fed today, with markets watching not just rate guidance but any comments around Fed independence amid ongoing pressure from the Trump administration,” Botes said.
The Fed is widely expected to hold rates, with forecasters expecting the FOMC to keep rates at current levels throughout the year and only move again at the tail-end of 2027.
The Fed’s move comes ahead of the South African Reserve Bank’s first rate decision of the year on Thursday (29 January).
For South Africa, economists broadly expect the SARB’s Monetary Policy Committee (MPC) to follow the Fed and keep rates unchanged.
A Reuters poll found that 18 of 26 analysts expect the SARB to leave its repo rate unchanged. However, it is not a unanimous view, with eight predicting a 25-basis-point rate cut to 6.50%.
Whether the SARB holds or not, the prevailing view is that South Africa will see more rate cuts in the current cycle, with room for 50bps of cuts pencilled in for 2026 and another 25bps possible in 2027.
The SARB will announce its decision on Thursday at 15h00.
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