Bank of America shares positive news about the rand in 2025
The rand should end the year at around R17 to the US dollar, with the greenback strengthening in the first half of the year and the rand coming back strongly towards the end of 2025.
This is the view of Bank of America Global Research, which revealed its outlook for the South African economy in 2025 during a media roundtable.
Local market strategist for Europe, the Middle East, and Africa at Bank of America, Mikhail Liluashvili, explained that 2025 should be a year of two halves.
The first half is set to be dominated by a strong dollar, which will have its value boosted by increased uncertainty, a strong US economy, and the slowing down of other major economies.
In 2025, the bank expects further divergence between the world’s major economies, with the US pulling further ahead of the European Union (EU) and China.
Bank of America expects the US economy to grow by 2.4% in 2025 compared to around 1% for the EU. It expects China’s growth to be relatively flat without significant government stimulus.
This is set to continue the trend of excess global liquidity being allocated to US financial assets as they appear to be the only game in town for investors.
A strong US economy and exceptional returns from American assets have meant that the world’s dominant economic power has sucked up most investor cash for the past decade.
As such, the dollar has strengthened against most major currencies in the past few years as demand for the greenback has grown, Liluashvili said.
With investors converting most of their cash to dollars to invest in US assets, demand for other currencies has declined. In particular, emerging market currencies such as the rand have been hard hit.
This flow has accelerated since Donald Trump won the US election in November, with the dollar strengthening and emerging market currencies plunging in value.
Liluashvili said that demand for the dollar is at all-time highs, while the vast majority of traders are bearish towards emerging market currencies.
He explained that very few investors are bullish on the rand prospects as things stand, but the picture can change quickly as the dollar is almost priced to perfection.
As a result, disappointment or shock from the US could rapidly flip the equation, with emerging market currencies coming into favour.
Liluashvili also said the rand stands to gain the most in this citation, as Bank of America research indicates that it is the most undervalued emerging market currency. The rand is currently around 12% undervalued, according to his calculations.
Once the dollar peaks and begins to weaken, Liluashvili expects the rand to gain strongly but said Bank of America is currently waiting on the sidelines to see if Trump can manage to implement his stated policies.

In the year’s second half, the dollar is expected to gradually weaken as the investors rotate back to emerging markets in search of returns.
Bank of America expects this rotation to happen mainly because of base effects, with US assets unlikely to repeat the performance of the past two years.
It also expects Trump’s policies to produce an initial ‘sugar rush’ for the US economy, with optimism around tax cuts and increased government efficiency encouraging investment in financial assets.
However, this is ‘hot money’ which can leave the financial system at the click of a button and so is very sensitive towards sentiment.
As the ‘sugar rush’ boosts investments, there is an increasing chance that investors will pull out of a market that is already at all-time highs out of fear of a correction.
Other factors, such as higher interest rates for longer periods of time, may also act as a gravity on US financial assets as they impact company earnings.
Bank of America does not expect the Federal Reserve to cut interest rates at all in 2025 due to a strong US economy and higher-than-expected inflation.
This means that interest rates will be higher for longer in the US, with the bank not completely discounting the potential for rates being raised.
Furthermore, Liluashvili said that emerging market fixed-income assets have very attractive returns, with South African government bonds being a case in point.
This will pull investors towards these assets, particularly during periods of instability, as they provide a high level of security and guaranteed returns.
Liluashvili also said that most investors are overweight South African government bonds in 2025, with allocations towards them being at their highest level in 24 months.
Increased allocations towards these assets should increase demand for the rand and thus boost its value in comparison to the dollar.
As this plays out in the second half of the year, the rand should strengthen towards R17 to the dollar.
Liluashvili was clear that this would not mean the rand is fairly valued, with stronger economic performance and fiscal prudence needed to return the currency to its fair value. This may only happen in 2026/27.
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