Reality check for the South African rand

While South Africa’s rand is on a strong run, the local currency is not expected to see the same gains it saw in 2025 over the next few years.

However, things are looking up for the rand, with the currency gaining in its own right, and its purchasing power parity (PPP) valuation is placed at around R16/USD.

Investec chief economist Annabel Bishop explained that the rand’s strength in 2025 was driven by factors outside the country’s control.

This includes a weaker United States dollar, a rally in commodity prices, particularly precious metals prices, and resilient global trade.

These factors boosted the rand, which was up 13.9% year on year in 2025 against the greenback.

The rand has continued to gain in 2026 so far, but this time, Bishop explained that the local currency is strengthening in its own right, with factors outside a weak dollar to thank.

She said the rand is 1% stronger against the US dollar this year, up 2.2% against the euro, and 1.6% against the British pound.

A continuation of the commodities rally, which has seen the gold price at historic highs, has aided the rand. In particular, high gold and platinum prices have proved to be a boon for South Africa.

In addition, South Africa is expected to see far faster economic growth in 2026, with the International Monetary Fund projecting 1.4% growth. Bishop explained that faster growth tends to aid the rand.

“However, it is mainly international events which impact the domestic currency, and the resilience of global trade, and world economic growth, last year aided global financial market sentiment, with the IMF noting this resilience should persist,” she said.

All of these factors are set to support a stronger rand in 2026. However, Bishop cautioned that the rand is not expected to see the same gains from its current value as it did in 2025.

The rand temporarily reached R16.30/USD in the first week of 2026, from R16.51/USD at the start of the year.

However, the local currency was rebuffed quickly from the firm resistance level of R16.30/USD, which Bishop said will require substantial momentum to convincingly pierce.

The rand’s performance over the past year against the US dollar, euro and British pound can be seen in the graph below.

Cyclical factors

Bishop places the PPP valuation of the rand – sometimes simply referred to as its “fair value” – near R16.00/USD.

Other economists have placed the rand’s fair value on a PPP basis even lower. Aluma Capital chief economist Frederick Mitchell previously placed the currency’s fair value between R11.30/USD and R14.30/USD.

Regardless, Bishop said the next few years are not expected to see the rand gain by near R4.00/USD again.

However, she noted that the local currency could see some further strength this month and even in this quarter, although a number of risks prevail.

Some of the risks to the rand’s outlook stem merely from cyclical factors, based on trader behaviour throughout the year.

Bishop explained that the rand tends to see strength over the turn of the year, as risk-taking is elevated in the Northern Hemisphere winter.

This normally changes as the year continues, with the Northern Hemisphere’s summer vacation seeing risk aversion rise.

“The sell-in-May and go away (on holiday) period tends to see global markets thinner, as key market players tend to take leave, while October often sees churn as market players return, then settle in for the six months, often seeking risk and reward,” Bishop explained.

In Bishop’s expected case for the rand, she sees the local currency ending the year at R16.75 against the greenback, and down to R16.65/USD by the end of 2027.

Bishop’s forecast for the rand’s exchange rate against major currencies can be seen in the table below.