Rand breaks through R16 to the US dollar

South Africa’s rand has continued to strengthen against the US dollar, with the local currency having briefly broken through the R16/USD threshold for the first time since 2022.

On Monday, 26 January, at around 10:40 South African time, the rand fell to as low as R15.99 against the US dollar, amid elevated global uncertainty, pending interest rate decisions in the US and South Africa, and a soaring gold price.

While the rand has since bounced back up to above R16/USD, the local currency has been noticeably strengthening against the US dollar over the past month, up about 3.6% against the greenback in January to date.

Citadel Global director Bianca Botes explained that markets entered this week on a cautious footing, with US equity futures softer ahead of the Federal Reserve’s expected policy decision on Wednesday, 28 January.

Markets largely expect the Federal Reserve to keep rates steady at its meeting this week. However, Botes said Fed guidance will be closely watched.

The South African Reserve Bank is also expected to make its interest rate decision on Thursday, 29 January, a day after the US Federal Reserve’s announcement. 

Markets expect the Reserve Bank to also hold rates steady following an interest rate cut in November 2025, although they project another rate cut to come in March.

Botes further explained that political risk remains elevated this week, with renewed shutdown concerns in the United States amid President Donald Trump’s threat of 100% tariffs on Canadian imports.

“Currency markets are already volatile. The yen surged to a two-month high on speculation of possible US-Japan coordination, pushing the US Dollar Index close to a four-month low and lifting a range of emerging market and commodity currencies,” she said.

TreasuryONE currency strategist Andre Cilliers explained why this speculation about Washington joining Japan in supporting the yen has weakened the dollar.

He explained that even the hint of coordinated intervention is enough to shake confidence, because it suggests the United States may be comfortable with a weaker dollar to help exporters.

This marks a big psychological shift for markets, which still treat the greenback as the anchor currency.

The rand has been benefitting immensely amid this elevated uncertainty, which has boosted not only emerging market currencies but also the gold price, which is typically good news for South Africa.

Therefore, another factor boosting the rand is the soaring gold price, which hit another record high on Monday, up 1.8% to $5,074/ounce.

Bloomberg reported that this extension of gold’s breakneck rally has been fueled by Trump’s reshaping of international relations and investor flight from sovereign bonds and currencies.

“In recent weeks, the Trump administration’s actions – attacks on the Fed, threats to annexe Greenland, military intervention in Venezuela – have spooked markets,” the publication reported.

“For investors looking to navigate this uncertainty, the haven appeal of gold has rarely been more attractive.”

The soaring gold price forms part of an ongoing rally in commodity prices, particularly for precious metals, which has been boosting South Africa’s trade balance. Cilliers said the rand has been a quiet winner in this setup.

“A softer dollar helps by default, but the bigger tailwind is the surge in precious metals, especially platinum group metals, which strengthen South Africa’s terms of trade and improve the underlying flow picture into the currency,” he explained.

“USD/ZAR has been pressing lower, with traders eyeing below R16.00s as the next staging ground. If the dollar stays under pressure and metals remain bid, the rand can keep grinding firmer, though, as always, it remains sensitive to any sudden global risk-off shock.”