The resilient Rand’s outlook towards year-end

Currency and global markets expert Bianca Botes, Director at Citadel Global, explains the factors that will have an impact in the coming weeks and how the currency is likely to perform.

The South African (SA) rand demonstrated notable resilience over the past few weeks, despite serious global challenges. This firmness is likely to hold through year-end, supported by several constructive underlying factors, says Bianca Botes, Director at Citadel Global.

“In the past month, the rand strengthened significantly despite extraordinary volatility in precious metals and global markets. It also weathered gold's largest single-day decline in over a decade with impressive stability, supported by the United States (US) dollar weakness and SA’s removal from the Financial Action Task Force (FATF) grey list on the 24th of October. This structural improvement, combined with contained inflation, positions the rand constructively as we close off the year. It is important to note, however, that a rate cut by the South African Reserve Bank would place the rand under pressure, while a reduction in US Federal Reserve rates would be supportive of the currency.”

THE RAND’S RECENT REMARKABLE STABILITY AND RESILIENCE EXPLAINED

Botes said the rand had been bolstered by positive recent announcements: “Treasury’s renewed focus on fiscal consolidation and inflation targeting, shared in last week’s Medium-Term Budget Policy Statement (MTBPS), combined with Standard & Poor’s credit rating upgrade, bodes well for the rand.”

The rand’s continued resilience in the weeks ahead would however also depend on the outcomes of upcoming central bank meetings in the US and SA and whether rate cuts would be implemented on either side of the Atlantic. “It is worth noting that the rand went below the R17 to the US Dollar mark on Thursday before consolidating its profits and we saw a slight depreciation due to heightened global risk aversion amid uncertainty about US rate cuts and potential data surprises as the US starts to publish again after its historic government shutdown that ended last week.”

“The rand has recently shown remarkable resilience through heightened uncertainty in global markets, because it benefited from multiple supportive factors,” says Botes.

“Structural reforms and the end of load-shedding are also supporting the improved outlook, though growth remains modest by historical standards, and National Treasury has revised its growth forecasts downward in the MTBPS,” says Botes.

WHAT LIES AHEAD FOR THE RAND IN THE FOURTH QUARTER

The SARB will play an important role in the continued stability and strengthening of the rand, according to Botes. “The combination of contained inflation, a stronger rand limiting imported price pressures and the need to support growth, argues for continued gradual easing. Inflation is projected to linger around the 3.4% mark for the remainder of 2025. Following the MTBPS, the market is now divided on whether to expect at least one more 25bps cut before year-end, potentially bringing the repo rate to 6.75%. The rand however pushed through the psychologically significant R17.00 to the dollar mark on the back of an improved outlook for the South African economy.”

The next important development to watch this week is the potential publication of the US’s non-farm payroll (NFP) data, which had been delayed by the long government shutdown, said Botes. Another US factor that could be supportive of the rand is the rare earth deals signed by US President Donald Trump at the recent Association of Southeast Asian Nations (ASEAN) Summit. “The deals have the potential to reduce supply chain risks for global technology and SA commodities which play an important role in this supply chain. SA President Cyril Ramaphosa’s attendance at the summit, where he engaged with global leaders including President Donald Trump and Brazilian President Luiz Inácio Lula da Silva, also reinforced SA's international standing. These developments bode well for the SA economy, commodity exports and rand,” says Botes.

Citadel Global was also cautiously optimistic about the performance of SA bonds, which offer attractive yields in a falling global yield environment. “We have seen a bond rally which has caused prices to go up and yields to fall. This creates strong demand from foreign investors seeking yield, particularly as developed market yields compress. The SA 30-year breaking below 10.00% is a milestone that reflects improving perceptions of long-term fiscal sustainability.”

Looking at all of these factors, Botes says downside risks include any surprise moves by the US Fed, a global growth slowdown, commodity volatility, domestic fiscal concerns due to local political instability and any major geopolitical shocks, including conflicts, which could spike global market volatility. Botes also cautions that the rand has been up 9.54% year-on-year, an impressive run which may see a pullback to the 17.40 – 17.50 rand to dollar range.

THE RAND’S EXPECTED PERFORMANCE AGAINST THE DOLLAR, EURO AND POUND

Botes expects the rand to remain in the 16.90 to 17.75 range against the dollar, in the 19.60 to 20.50 range against the euro and the 22.40 to 23.40 range against the British pound in the medium-term, the fourth quarter of 2025 and first quarter of 2026.

“The rand could realistically once again test the 17.00 rand to the dollar psychological level in the coming weeks and potentially break through to the 16.80 – 16.90 range if all positive catalysts align. The base case assumes continued dollar weakness, no major geopolitical shocks and steady implementation of domestic reforms. Other factors that may play a role in global currency dynamics include the stability of the euro and Britain’s ongoing growth and inflation issues.”

In conclusion, she says: “SA’s exit from the grey list should not be underestimated, because it addresses a real structural constraint on capital flows that has existed since 2023. Combined with reasonable inflation (3.4%), attractive carry (8.6% on 10-year bonds), the well-received MTBPS, SA’s credit ratings upgrade, a weakening dollar and reduced geopolitical risk premium following constructive developments at the ASEAN Summit, the fundamental backdrop supports rand resilience even if the pace of gains moderates from recent levels. The medium-term trajectory is constructive, with the 17.00 level representing a realistic near-term target and the high-16s achievable into 2026 if current trends persist.”