{"id":844657,"date":"2025-11-27T07:00:00","date_gmt":"2025-11-27T05:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=844657"},"modified":"2025-11-27T07:12:24","modified_gmt":"2025-11-27T05:12:24","slug":"warning-about-the-rands-strength-against-the-dollar","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/844657\/warning-about-the-rands-strength-against-the-dollar\/","title":{"rendered":"Warning about the rand’s strength against the dollar"},"content":{"rendered":"\n

The South African rand has strengthened against the US dollar over the last year, but South Africans should not expect guaranteed future strength in the coming year. <\/p>\n\n\n\n

The rand, like many currencies worldwide, has strengthened against the US dollar since the beginning of the year. <\/p>\n\n\n\n

This primarily comes amid concerns over the US\u2019s fiscal policy, lower interest rates in the US, and the new administration\u2019s desire for a weaker dollar. <\/p>\n\n\n\n

Developments in South Africa have, however, been relatively positive, with the country being removed from the grey list, receiving a ratings upgrade from S&P Global, and achieving some of the best market returns in the world. <\/p>\n\n\n\n

This has seen the rand strengthen from R18.18\/$ a year ago to R17.13\/$ today, with the rand seeing some of its best performance in years. <\/p>\n\n\n\n

Notably, several metrics indicate that the rand remains significantly undervalued compared to the US dollar. <\/p>\n\n\n\n

For instance, the popular Big Mac Index, which compares the price of Big Macs worldwide, shows that the rand is significantly undervalued. <\/p>\n\n\n\n

The latest comparison showed that a Big Mac costs R53.90 in South Africa and US$6.01 in the United States. The implied exchange rate is thus R8.97\/$<\/strong>.<\/p>\n\n\n\n

The difference between this and the actual exchange rate (at the time of the index) of R17.88 suggests the South African rand is 49.8% undervalued<\/strong>.<\/p>\n\n\n\n

While the rand has been a strong performer over the last year, Morningstar Chief Investment Officer Dan Kemp warned that a quick correction is unlikely. <\/p>\n\n\n\n

Speaking to BusinessTech, Kemp said that currencies can remain far from their fair value for years. <\/p>\n\n\n\n

He added that currencies can take anywhere from a few months to around five years to adjust to their fair values. <\/p>\n\n\n\n

While the rand may strengthen further against the US dollar, South Africans should not be overly optimistic about the rand reaching its Big Mac value of R8.97\/$. <\/p>\n\n\n\n

South Africa heading in the right direction<\/h2>\n\n\n
\n
\"\"<\/a>
Morningstar CIO Dan Kemp<\/figcaption><\/figure><\/div>\n\n\n

UK-based Kemp remains optimistic about South Africa\u2019s potential, noting that the country is moving in the right direction. <\/p>\n\n\n\n

From the start of the year to September, Morningstar said that South Africa has quietly been one of the best-performing markets in the world, seeing a 42% return in US dollars. <\/p>\n\n\n\n

However, Kemp noted that this growth has been widespread and concentrated among single-commodity miners in the gold and platinum sectors. <\/p>\n\n\n\n

Kemp added that South Africa has not benefited from foreign inflows over the last year, with the nation still making up only about 3% of the emerging market universe. <\/p>\n\n\n\n

Given that other emerging markets, such as Brazil and Mexico, offer more attractive valuations, South Africa will remain a relatively small market for international investors. <\/p>\n\n\n\n

For South African investors, however, Morningstar still sees value in several local companies, especially in the mining and banking sectors. <\/p>\n\n\n\n

The company stated that diversified miners, such as BHP, Anglo American, and Glencore, offer more diversified trades, while gold and platinum miners appear fully priced. <\/p>\n\n\n\n

South African financials also offer the most attractive upside for local rand-based investors, with the nation\u2019s Big Five banks trading at reasonable valuations. <\/p>\n\n\n

\n
\"\"<\/a>
Dollar to Rand Exhange Rate<\/figcaption><\/figure><\/div>\n\n
\n
\"\"<\/a>
Big Mac Index<\/figcaption><\/figure><\/div>\n\n\n
\n","protected":false},"excerpt":{"rendered":"

The rand has strengthened against the US dollar this year, but South Africans should not expect the rand to reach a fair value quickly. <\/p>\n","protected":false},"author":95,"featured_media":750456,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[11216,11544,11765,853],"class_list":["post-844657","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-big-mac","tag-morningstar","tag-sp-global","tag-south-africa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/844657","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\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=844657"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/844657\/revisions"}],"predecessor-version":[{"id":844721,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/844657\/revisions\/844721"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/750456"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=844657"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=844657"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=844657"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}