Great news for the rand in 2026
The rand has marked one of its best years in recent memory in 2025, with economists expecting the good time to keep rolling in the new year.
The rand has entered the final weeks of 2025 trading well below R17.00 to the dollar, having broken through the psychological resistance level and maintaining its position.
The break followed a much narrower-than-expected budget deficit in the first week of December, which tail-ended a flurry of positive economic moves.
This includes a well-received medium-term budget in November, South Africa’s removal from the FATF grey list, a credit rating upgrade from S&P Global, and a cut to interest rates amid low inflation.
What has been most remarkable for markets, however, is the fact that the rand has performed so well amid targeted trade and political attacks from the United States.
The US imposed a 30% reciprocal tariff on South Africa in August, which impacted some of the country’s key exports in the auto manufacturing and agricultural sectors.
While economists believe the real impact of the tariffs and failed trade negotiations with the US will only really be felt in 2026, the general consensus among analysts is that the impact has been less dire than expected.
Another surprise for the rand is that a gauge of expected volatility for the currency versus the dollar is at its lowest level since the turn of the century.
The rand is known to be a highly volatile currency, even among emerging market currencies, often reacting quite wildly to local and global shocks.
However, as it stands, analysts don’t see much volatility heading into the new year. On top of the marked resilience in the currency since the middle of 2025, the rand is uncharacteristically stable.
Despite the positive swing, it must be noted that the rand still carries a significant risk premium tied to entrenched problems in South Africa.
This includes a stagnant economy which is not growing fast enough to create jobs, and the resultant unemployment crisis, where a third of the workforce is sitting idle.
On a purchasing power basis, the rand should be trading at closer to R13 to the dollar, but on a more realistic fair-value basis, economists say it should be at about R16/$.
2026 joy expected
Given the rand’s surprising performance in 2025, the prospect for 2026 looks positive.
According to Investec chief economist Annabel Bishop, the rand continues to take much of its direction from movements in the dollar.
Fortunately, this looks to be working in the rand’s favour.
She noted that a lot of positivity is riding on the US Fed’s interest rate moves, with cuts in the world’s largest economy being beneficial for global growth.
This, in turn, feeds commodity prices, and commodity currencies like the rand stand to benefit.
However, she noted that this is not the only driver, and 2025 showed that there have been a number of improvements throughout the year.
“This is expected to persist over 2026 too,” she said.
In Investec’s economic scenario modelling, the case for the rand to reach R16/$ is attached to the ‘upside’ scenario, which carries a 14% probability.
In the banking group’s base case (51% probability), the rand sticks around the R17/$ level for most of 2026, weighed down by persistently low growth, slow reforms and structural constraints.
However, many of the green flags for the upside scenario have already come to pass, including being removed from the FATF grey list, positive outlooks on credit ratings, low inflation, and favourable climate from SA crops.
Under the ‘upside’ scenario, the rand would head towards R16.00 to the dollar by mid-2026, and possibly even break through to around R15.70 by the end of the year.
Things that would help this along faster—which area also shows positive signs—are faster-paced reforms, increased privatisation of failed state capacity, a risk-on environment for global investment and rising confidence levels.
Unfortunately, there are also factors at play that are not favouring this scenario, such as stagnant growth—cemented by poor government economic policies and red tape—and heightened geopolitical tensions.
On the balance of factors being looked at in each scenario, there appears to be a tilt to the positive, with the rand’s current strength reinforcing the view.
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