Why the rand is in retreat
After hitting its best levels in almost three years, the rand has retreated back above R17.00 to the dollar, again facing a tough resistance level and a more sustained break into stronger territory.
As has been the case for much of the rand’s story in 2025, this is because of the US dollar, which has strengthened in recent sessions thanks to the end of the US government shutdown.
According to Investec Chief Economist, Annabel Bishop, the end of the shutdown means that markets will soon be flooded with delayed economic data from the world’s biggest economy.
This has led to a rise in risk aversion as markets await the outcome, particularly in relation to how it may affect the US interest rate-cutting cycle.
Before the shutdown, markets were anticipating a more aggressive cutting cycle from the US Fed, which would have boosted emerging market currencies like the rand.
However, with no data being published under the US’s record-long government closure, prospects for rapid cuts diminished, with the Fed pointing to a more cautious approach.
The US government shutdown was the longest on record, lasting 44 days. The previous record was the 35-day shutdown of 2018–2019, during the first Trump presidency,
Bishop noted that market projections now show only a 42% probability of another 25bp interest rate cut this year in the US, with the Fed recently indicating it is unlikely to cut at every consecutive meeting.
This, in turn, has also boosted the dollar’s strength, diminishing the rand’s recent rally.
Once again, this highlights how the rand’s movements are directed more by international factors than local, with two major boosts happening last week.
A credible and optimistic medium-term budget review by the National Treasury drove positive sentiment towards local markets. This led to the rand breaching R17.00 to the dollar and hitting as low as R16.95/$.
This was followed by a credit rating upgrade by S&P Global on Friday (14 November), which added to the bull run.
The rand is currently trading at R17.07 to the dollar. While in retreat from the high seen last week, it still remains stonger territory relative to most of the year.
“While South Africa has seen a number of rand-positive factors recently, movements in hard currencies often have more of an impact than the rand’s movements themselves, on its own,” Bishop said.
“Markets await the publication of the delayed US data.”
What the market is watching
Notably, the rating upgrade did not do much to boost the rand, implying that it was already priced into the market following the budget review.
This is also attached to the reality that, even with the upgrade, South Africa remains in ‘junk status’, or sub-investment grade on major indices.
South Africa is still on a BB- rating from Fitch, with a stable outlook, while Moody’s and S&P are aligned at BB.
That said, there may still be good news for South Africa ahead, with Moody’s and Fitch still able to reinforce the positive swing from S&P Global.
Fitch has noted that the MTBPS has maintained a fiscal consolidation drive, but does not give the date of its country review of South Africa.
Fitch noted that South Africa’s revenue projection for this fiscal year “remains conservative, with upside risk stemming from continued corporate income tax outperformance amid elevated commodity prices, and potential gains following investment in the revenue service.”
Moody’s, meanwhile, has a South African rating review scheduled for 5 December. It currently has the country on a stable outlook, and so the agency is not necessarily expected to upgrade South Africa.
However, both Fitch and Moody’s may move to a positive outlook, if not outright upgrading their ratings.
Regardless, Bishop said that market attention will barely be on South Africa this week, with the main angle being the heavy and delayed data from the United States.
These include various data releases on the US housing market, retail/wholesale trade sales, international trade data, data on inventories, infrastructure and capital goods orders, along with other manufacturing data and labour market data.
Locally, attention will also turn from the budget and S&P rating upgrade to the next move by the South African Reserve Bank (SARB), where the market is anticipating another small 25 basis point cut to interest rates.
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