Rand goes from zero to hero
Six months ago, the South African rand seemed to be in freefall. However, the currency staged a significant turnaround, recently trading at its strongest levels in two years.
In April, shattered by a US tariff-driven sell-off and a near collapse of the Government of National Unity, the rand hit its worst levels in history and nearly breached R20 to the US dollar.
However, by early October it was trading near R17.00, its strongest point in more than two years, with economists at the time projecting a push past the key resistance level.
According to Investec Chief Economist, Annabel Bishop, the rand has paused in its recent move towards R17.00/$, on profit taking and some US dollar strength.
The unit is currently trading at R17.45/$, and has been fluctuating in a tight range around R17.30/$.
R17.00/$ is a major resistance level, and market players are currently using the rand‘s strength against the US dollar as a buying opportunity for dollars, Bishop said.
“While there has been some stability in the rand against the US dollar recently, the rand has seen some mild strength against the euro and pound over October, as foreign purchases of SA portfolio assets have increased on improved investor sentiment.”
According to Rashaad Tayob, portfolio manager at Foord Asset Management, for a currency that often serves as the world’s favourite shock absorber, the turnaround for the rand has been remarkable.
He noted that, over the past quarter, the rand has outperformed most emerging-market peers and even commodity currencies such as the Australian dollar.
“For once, South Africa’s high real yields and trade surplus have combined with improving risk sentiment to support the currency rather than punish it,” he said.
Notably, as has been mentioned by several economists and analysts, the rand’s rebound has largely been thanks to a global retreat from the dollar.
The greenback fell about 7% in the second quarter as investors started to price in rate cuts by the US Federal Reserve.
As noted by Bishop, the Fed’s Federal Open Market Committee (FOMC) has also signalled an end to quantitative tightening, which has provided some support for markets on its neutral stance.
However, Tayob said the story is not just about the US and the dollar, and has become more local.
“Since mid-year, the dollar has steadied while the rand has continued to climb — supported by foreign inflows into emerging markets and a powerful rally in gold and platinum prices,” he said.
Paper currencies in doubt
The rand’s recovery has also played out against a broader backdrop of doubt about the world’s paper currencies, Tayob noted.
Gold has surged past successive records — first $3,000, then $4,000 an ounce — as investors hedge against the erosion of value in fiat currencies.
The BRICS bloc, led by China, has been diversifying reserves into gold, prompting renewed talk of a future alternative to the dollar-based system.
Rising government debt across developed economies has supported that narrative, he said.
“With little sign of fiscal restraint and central banks now cutting rates, investors are questioning how long fiat currencies can hold their value.”
“Long-term bond yields in the US have risen even as policy rates fell — a subtle signal of unease about inflation and debt sustainability.”
Tayob said that the massive sell-off in April was “revealing”, adding that, for decades, the dollar strengthened whenever global markets turned risk-averse.
“This time, however, both risk assets and the dollar fell together — a sign that investors are beginning to look elsewhere for safety,” he noted.
The portfolio manager said that, in the short term, “caution is warranted” and tactical holding in US currency still makes sense.
“But, over the long run, diversification across currencies — and into real stores of value like gold — will remain essential for protecting wealth in a world where money itself is being quietly revalued,” he said.
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