{"id":837619,"date":"2025-09-15T15:53:05","date_gmt":"2025-09-15T13:53:05","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=837619"},"modified":"2025-09-15T15:53:32","modified_gmt":"2025-09-15T13:53:32","slug":"rand-flexes-as-money-floods-into-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/837619\/rand-flexes-as-money-floods-into-south-africa\/","title":{"rendered":"Rand flexes as money floods into South Africa"},"content":{"rendered":"\n

The rand hit recent highs against the US dollar on Monday (15 September) as prospects for interest rate cuts in the United States sent investors pouring into emerging market bonds.<\/p>\n\n\n\n

As a result, South Africa has seen substantial foreign inflows, with R41.3 billion in net bond purchases, according to Bloomberg.<\/p>\n\n\n\n

Investec Chief Economist Annabel Bishop noted that the US dollar saw a period of relative stability last week following growing weakness that kept the rand resilient against the greenback.<\/p>\n\n\n\n

Now the rand is enjoing significant strength from the portfolio inflows, she said.<\/p>\n\n\n\n

In addition to the money coming in, South Africa’s trade balance lifted by a substantial amount in the second quarter of the year and over July, despite the harsh 25% tariffs introduced on automotive exports to the US in early April.<\/p>\n\n\n\n

Even South Africa’s automotive exports were substantially higher in the first half of 2025 than in the comparable period in 2024.<\/p>\n\n\n\n

While the 25% automotive tariff over Q2.25 caused an 82% drop in H1.25 vehicle exports to the US, South Africa\u2019s global vehicle exports rose 7.9% y\/y in contrast in the same period (H1.25), lifting South Africa\u2019s export sector overall in Q2.25.<\/p>\n\n\n\n

This comes with the caveat that the additional 30% tariff on exports to the US from South Africa only came into effect from early August, and the impact of that is yet to be seen.<\/p>\n\n\n\n

However, Bishop noted that about 70% of South Africa’s exports to the US are metals, minerals, or origins thereof, with near half exempt from US tariffs.<\/p>\n\n\n\n

“Ao a complete collapse of goods exported to the US was never likely, with exports to the US overall only 7% of SA exports,” she said.<\/p>\n\n\n\n

The outperformance in South African vehicle exports and the development of alternative export destinations has reduced Investec’s worries about the tariff impact on growth.<\/p>\n\n\n\n

Bishop had previously factored in a 0.1 to 0.2 percentage point impact on GDP because of the tariffs, “but with the limited impact on vehicle exports so far this year, this means South Africa’s GDP could come out just above, 1.0% y\/y, as opposed to just below if it persists,” she said.<\/p>\n\n\n\n

Meanwhile, July saw a relatively healthy trade surplus again similar to May and June\u2019s, but August\u2019s figure is not out yet. <\/p>\n\n\n\n

“The improvement in the trade balance has also driven rand strength, particularly over May and June, although many factors are involved,” Bishop said.<\/p>\n\n\n\n

The third quarter to date saw less overall rand strength in the main, although September on its own to date has seen the rand run stronger. <\/p>\n\n\n\n

Interest rate cuts bring good news<\/h2>\n\n\n\n
\"\"<\/a>
Investec Chief Economist, Annabel Bishop<\/figcaption><\/figure>\n\n\n\n

According to Bishop, looming interest rate cuts in the United States are also helping to boost the rand.<\/p>\n\n\n\n

She noted that the rand tends to gain as the US cuts interest rates, typically strengthening already in anticipation, with the reverse true when the US Fed hikes.<\/p>\n\n\n\n

This is usually signalled in the markets long ahead of time, with current indications that the US Fed is highly likely to cut in September.<\/p>\n\n\n\n

In 2022 the rand was at R14.50\/$ in April but weakened for the rest of the year, and over the following years, on expectations of higher global interest rates. <\/p>\n\n\n\n

The advent of US interest rate hikes also added to a prolonged period of risk aversion, Bishop said.<\/p>\n\n\n\n

“With building financial market expectations for more US rate cuts than was previously expected for this year and next, the rand has run stronger as foreigners have been net purchasers of South African bonds this month,” she said.<\/p>\n\n\n\n

However, the economist warned that financial market portfolio flows can be quite volatile for South Africa, which in turn can add to rand volatility. <\/p>\n\n\n\n

Also, while Bloomberg’s data points to net bond inflows, foreign holdings of South African equities has seen net outflows.<\/p>\n\n\n\n

Bishop also noted that, against other key currencies, the rand has not seen the same strength as against the dollar, and is flat to weaker.<\/p>\n\n\n\n

This shows that the current strength against the dollar has more to do with SA-US market dynamics, rather than any inherent strength to the rand itself.<\/p>\n","protected":false},"excerpt":{"rendered":"

The rand hit recent highs against the US dollar on Monday (15 September) as prospects for interest rate cuts in the United States sent investors pouring into emerging market bonds.<\/p>\n","protected":false},"author":10,"featured_media":832532,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[19853,2922,3670],"class_list":["post-837619","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-annabel-bishop","tag-interest-rates","tag-rand"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837619","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=837619"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837619\/revisions"}],"predecessor-version":[{"id":837624,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837619\/revisions\/837624"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/832532"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=837619"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=837619"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=837619"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}