Rand hits R18 to the dollar as ‘Trump trade’ bites
The South African rand has hit past R18.00 to the dollar as emerging markets remain on the back foot following Donald Trump’s re-election as US president and his policy intentions take shape.
The rand was trading at R18.03 to the dollar on Tuesday (12 November), weakening to its worst point since mid-August.
The main source of weakness stems from the much stronger dollar, which climbed towards a one-year high amid what markets are calling the “Trump trade”.
According to Citadel Global director Bianca Botes, this has to do with Trump’s potential trade and immigration policies, which are expected to drive inflation up and keep interest rates elevated in the future.
“His anticipated tax cuts also add to this inflationary outlook,” she said. “Traders are closely watching US inflation data, due out on Wednesday, for more clues on the US interest rate direction, with October inflation expected to remain firm.”
As a result, most emerging market currencies—including South Africa—declined as investors assessed Trump’s agenda and the strong dollar’s effects on regional economies.
The rand was trading at these levels at 15h30:
- ZAR/USD: R18.03
- ZAR/BGP: R23.12
- ZAR/EUR: R19.16
Johann Els, Group Chief Economist at Old Mutual, said that Trump’s America is a complex situation with numerous variables at play—but even the best-case scenario is that the president-elect’s policies are not great for the rand.
“His policies regarding trade tariffs would mean higher consumer goods prices. His immigration policy would limit labour supply and thus higher wage and salary pressures in the US, leading to higher inflation. Tax cuts would mean a higher budget deficit and thus upward pressure on interest rates,” Els said.
He stressed that the timing and implementation of these policies are critical factors.
“It all depends on how quickly this will be implemented. I still expect further US rate cuts over the next six months, but if his policies are implemented strongly and quickly, then there will be upward pressure on inflation.
“The Fed might have to stop cutting rates and will likely start hiking rates—this is sometime in the future, perhaps late next year into 2026,” he said.
Els noted that a Democrat-controlled House of Representatives could but a brake on Trump’s policies. This particular race has not been called yet, but many expect a clean sweep for Trump, which means his policies will face little resistence.
The knock-on effect on the dollar and emerging markets will be felt in South Africa—but the long-term impact is still up in the air.
“These policies and higher rates in the US will likely mean that the dollar will not weaken as much as I currently expect and, in fact, might strengthen. The opposite side of that coin is that Trump actually wants a weaker dollar. So there’s lots of moving parts in this equation,” he said.
“We’ve seen that the rand has weakened somewhat in anticipation of Trump’s policies, but I think it is too quick to judge how quickly that will be implemented, how quickly this will work its way through. I think current market reactions are knee-jerk and might not last. However, we need to watch this going forward.”
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