Although the rand averaged R17.98/$ for the year up to the end of November, the past few days had economists and investors paying more attention as the rand dipped to R16.72/$ briefly on Tuesday afternoon, the highest level in three years since January 2023. The rand already briefly dipped below R17/$ on 13 November, the day after the minister of finance delivered the Medium-Term Budget Policy Statement (MTBPS). But more was to come last week.
Bonke Dumisa, independent financial analyst, says the rand opened at its the strongest level last Thursday at R16.87/$. He says this is entirely due to the 25 basis points cut in the USA Federal interest rates announced very late last Wednesday. “We must note that it usually happens that the global markets ‘quick money’ chases the highest bond-yields, and highest real global interest rates usually move to other countries wherever and whenever there are interest rate cuts.
“However, countries must regularly reduce their interest rates whenever there are lower inflation rate expectations as this lowers the costs of doing business in the country, which in turn boosts consumer demand and higher greenfield fixed investments in bricks and mortar projects.” He points out that the rand reached its strongest level in nearly three years at 5:07pm on Tuesday at R16.72/$. Annabel Bishop, chief economist at Investec, wrote in a note on the rand issued on 1 December that the rand averaged R17.98/$ for the year to date, ahead of the average for 2024 of R18.33/$, but not much stronger, at only a 2.0% appreciation. “The rand largely ignored developments domestically, strengthening on its own against the US dollar by only 0.5% this year on average to date.
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December and January tend to see some rand strength as risk aversion drops off to a degree, with this seasonal effect and often thin trade at year-end able to potentially see the domestic currency more successful in piercing the R17.00/$ mark. “The rand has essentially been flattish this year and last year against the US dollar on average, and over 2026 is expected to pull somewhat stronger but not see very substantial strength currently. The local currency on its own has space to make some gains next year, although politics and trade policy will remain in the spotlight in the US, which will in turn affect global risk sentiment and global financial market risk appetite.” Nolan Wapenaar, chief investment officer at Anchor Capital, says Anchor has been expecting the rand to strengthen for a while. “In our quarterly webinar held in October, we specifically stated that the rand would likely move into the high R16s against the dollar.
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