Africa-Press – South-Africa. The South African rand is currently enjoying a period of strength versus the US dollar, amid elevated commodity prices and improving local fundamentals.
This stands in stark contrast to the trend of 2011 to 2023, where the rand consistently weakened against the US dollar by around 5% per year.
2025 saw a complete reversal of this trend, with the rand gaining 10% against the dollar and, crucially, being more stable than in previous years.
This is feedback from Symmetry’s chief investment strategist, Izak Odendaal, who outlined the trends seen in the rand’s value over the past forty years.
Odendaal explained that after a period of severe weakness, the rand is recovering, supported by a weaker dollar, elevated commodity prices, and improving local fundamentals.
The US dollar has been on the back foot in 2025 due to elevated uncertainty regarding American policy and increased questioning of the sustainability of government finances in the world’s largest economy.
This has eroded some of the key fundamentals that underpin a strong dollar, particularly the security and safety of investing in America.
On the other hand, commodity prices soared in 2025, driven mainly by a rise in gold and platinum prices as investors searched for safety in hard commodities.
This has been coupled with improving fundamentals in South Africa, specifically regarding the government’s finances. The state is on track for its third consecutive primary budget surplus.
Odendaal said this can continue for some time, especially if the dollar remains on the back foot as it seems it will.
Furthermore, a lower inflation target of 3% should bolster the rand’s value further and make the currency more stable.
A lower inflation target will bring South Africa in line with its global peers, make its exports more competitive, drive economic growth, and reduce the state’s debt-servicing burden.
The rand’s expected volatility for the rand versus the dollar is at its lowest level since the turn of the century, suggesting traders expect little upheaval for the South African currency as the year draws to a close.
One-month implied volatility fell to 7.9%, the lowest since February 2000. The measure has plunged from as high as 15.55% in April, when President Trump’s tariff announcements roiled global markets.
This makes it easier for foreign investors to invest in South Africa, as they can be more sure that their investments will not be eroded by a weakening currency.
A return to the past
Odendaal warned that this trend will not last forever, as with any cycle. The rand, at some point, will weaken against the dollar.
Nothing suggests that the rand will not eventually resume its depreciating trend, Odendaal said. This is fundamentally due to the difference between inflation in South Africa and developed markets.
Achieving a 3% inflation target should limit the pace of the decline, flattening the trajectory, but not making it disappear.
Odendaal noted that there have been five historical facts about the rand over the past 45 years. These are outlined below –
Over the past 45 years, the rand has had a depreciating trend. This makes sense given South Africa’s higher inflation rate vs the dollar, though in fact the rand has depreciated more than PPP suggests.
Sometimes it overshoots that long-term trend. It collapsed in the early 1980s, again in the late 1990s, and depreciated sharply between 2011 and mid-2023 amid a globally strong dollar.
Periods of severe rand weakness are usually periods of global market anxiety, while a strong rand typically happens when global risk appetite is positive.
The rand tends to overcorrect in the other direction after periods of extreme weakness as global risk appetite improves. This was seen after 2001, 2008, 2015 and 2020.
An exchange rate is not the share price of a country, since it is the price of one currency expressed in terms of another – a ratio, in other words.
Odendaal used this to warn investors against assuming any trend will last forever, as, by nature, trends do come to an end.
Assuming the 2011 to 2023 trend would always continue was overdoing it, but the current rally is also not going to last forever.
In terms of investing, it is wrong to think that offshore investing is all about the currency, Odendaal noted.
Yes, it can help, but what you buy with your rands is more important, and also why you are buying it. Ultimately, global investing is about diversification, not timing the rand.
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