Rand plummets

The South African rand weakened tremendously after Donald Trump’s election victory, with experts warning that the weakness may continue.

On 7 November, a day after Trump’s victory was officially announced, the rand traded at R17.26 to the US dollar.

However, a week later, the currency weakened to R18.27 to the greenback. This is the weakest level since August 2024.

The rand faced significant headwinds, including a weaker gold price, the struggling Chinese economy, and uncertainty around Trump’s policy plans.

The Economist highlighted that Trump’s economic policies will likely bolster the United States economy but spell trouble for the rest of the world.

Trump’s victory has, so far, pushed bond yields higher, fuelled by expectations of stronger growth, the risk of inflation rebounding and rising fiscal debt.

The US dollar also rallied following Trump’s victory. The Bloomberg Dollar Spot Index rose to its highest since November 2022.

“We see a good chance of substantial dollar strength through next calendar year and potentially into 2026 as well,” said Helen Given, a foreign exchange trader at Monex.

“A Trump administration changes the calculus on forecasting materially as domestic policy points to a big spending spree and international policy is likely to be quite protectionist.”

“The election outcome amplifies the US dollar exceptionalism,” JPMorgan strategists led by Meera Chandan wrote.

“No other currency has what the dollar has: superior growth and equities, higher yield, defensive attributes.”

JPMorgan said the sentiment shock around Trump’s win is enough to boost the greenback, even with no official tariff announcement.

Given the lack of visibility about the timing of Trump’s policies, the dollar’s path is unlikely to be a straight line.

However, Chandan sees the greenback gauge strengthening as much as 7% in the coming months.

“We expect the US dollar to retain its strength in the near term as investors await more detailed policy direction from the incoming administration,” JPMorgan said.

The chart below shows the rand versus the US dollar over the past week.

Trump’s impact on South Africa and the rand

Deryck Janse Van Rensburg from Anchor Securities echoed The Economist’s view, saying Trump’s victory has been negative for emerging markets.

“The Trump victory will help to grow the United States economy, but it will come at the expense of emerging markets,” he said.

“There has been a big move in money moving into the US dollar, which translated into rand weakness.”

He warned that South Africans should expect further headwinds regarding SA Inc, which needs to be tackled to deliver decent earnings in local stocks.

David Shapiro from Sasfin Securities said the promise of the government of national unity (GNU) and a more stable electricity supply has not yet materialised.

“The share prices of many South African stocks ran ahead of the results. There is a lot of re-thinking,” Shapiro said.

He argued that China is one of South Africa’s biggest hurdles. “China is not kicking in. It is becoming a worry,” he said.

Commodity prices illustrate China’s lacklustre performance. “Oil prices are weak, palladium and platinum prices are below $1,000, and copper is not going anywhere,” he said.

Shapiro added that after the South African elections, many commentators predicted the rand could strengthen to R16.50 to the US dollar.

It was partly based on the United States lowering interest rates and making other countries, like South Africa, more attractive. This has not happened.

“Money is going into the United States because it is going to outgrow Europe, China, and other major economies,” he said.

There is a lot of enthusiasm about what is happening in the United States following the Trump election victory.

These factors make Shapiro reluctant to call the rand anywhere below R17.00 to the US dollar. “WE have probably seen its best levels,” he said.