South African rand on a rollercoaster ride

The rand is navigating a turbulent global financial landscape characterised by extreme uncertainty due to the announcement and subsequent changes to tariffs on goods imported into the United States. 

This has been compounded by speculation regarding the future of South Africa’s ruling Government of National Unity (GNU).

As a result, the rand’s value versus major currencies has swung dramatically in recent weeks, reflecting a mix of domestic vulnerabilities and global uncertainties. 

This is feedback from Marius Oberholzer, the head of multi-asset at Stanlib, who outlined some of the factors contributing to the rand’s volatility in recent weeks. 

Developments in the United States have injected volatility into equity, bond, and currency markets, with potentially longer-term impacts on global trade that have not yet been felt. 

For South Africa, a commodity-dependent economy, declining commodity prices and financial market turbulence present significant headwinds, Oberholzer said.  

This situation is exacerbated by the financial market volatility occurring when the global economic cycle was beginning to soften. 

The derisking by global market players, driven by movements in equities, bonds, and currencies, could lead to long-lasting consequences.

These dynamics, including US policy changes, could contribute to a perceived decline in the US dollar’s dominance and the broader implications of de-dollarisation. 

This creates a complex outlook for the rand, characterised by near-term weakness, potential for stabilisation, and considerable unpredictability. 

Oberholzer said that US tariffs, intended to enhance domestic competitiveness, may paradoxically weaken global demand and GDP growth, thereby indirectly pressuring emerging market currencies, such as the rand.

Against the dollar, the rand faces ongoing pressure, particularly given the South African government’s foreign policy position, which, while stated as neutral, is perceived by many as antagonistic to US interests. 

The rand’s vulnerability to global risk aversion is well-known. By emerging market standards, its deep currency and derivative markets mean that the rand acts as a proxy for broader issues, not just those of its own making.

The graph below shows the performance of the dollar versus major currencies and the rand since the beginning of March, with notable strengthening versus the South African currency. 

What the future holds

Oberholzer explained that the ongoing pressure on the US dollar may result in the rand rebounding against the greenback throughout the remainder of 2025. 

Recent shifts in tariffs from the United States and an escalating tariff dispute, which may escalate into a trade war, highlight the structural challenges facing the dollar.

These include a growing US net international investment deficit exceeding 80% of GDP and reduced foreign capital inflows, which may temper the rand’s depreciation against the dollar. 

Since the beginning of April, significant movements in global currencies have been observed, with the dollar weakening against the euro, pound, yen, and Swiss franc. 

Oberholzer explained that the market appears to be reassessing the USD’s status as the world’s reserve currency, driven by de-dollarisation trends and a perception of declining confidence in the US bond market.  

This dollar weakness could support the rand, with projections suggesting a trading range of R18.44/USD to R20.00/USD, which is biased toward the lower end as the dollar loses ground. 

Notably, the rand traded as low as R18.08 against the dollar in late March and could yet return to these levels as financial markets digest the impact of US tariffs. 

This volatility has been strong enough to push Stanlib to transition from having no currency hedges in its portfolios to increasing currency hedges across all our multi-asset portfolios to mitigate risks associated with currency fluctuations.’

However, one weakness of the rand is the performance of the South African economy, which is crucial to its sustained strengthening against the dollar. 

The rand’s trajectory is less directly tied to de-dollarisation but still affected by global risk sentiment and South Africa’s economic fundamentals, which remain fragile amid concerns about the GNU and domestic growth prospects.

Longer term, the broader theme of de-dollarisation adds unpredictability, presenting risks and opportunities for the rand. 

A weaker dollar may alleviate some of the depreciation pressure, but the rand’s exposure to global trade disruptions and its lack of insulation leave it vulnerable.

For now, the rand will likely remain range-bound against major currencies, with near-term weakness giving way to stabilisation, based on global trade dynamics and South Africa’s ability to navigate domestic challenges.