Africa-Press – South-Africa. Although the South African rand strengthened against the US Dollar in 2025, it weakened against the British Pound and the Euro.
The local currency, therefore, did not truly strengthen. Instead, it was the Dollar’s weakness which caused the higher rand value against the greenback.
Investec chief economist Annabel Bishop explained that the rand was 1.7% weaker year-over-year against the euro in 2025.
It was also 0.6% weaker year-on-year against the British pound over 2025, which illustrates the local currency’s true strength.
The South African rand gained only 1.1% year-over-year on a nominal trade-weighted basis, mainly due to the dollar’s weakness against the rand.
The greenback’s weakness led to a 2.5% strengthening of the South African rand versus the US Dollar exchange rate.
However, the US dollar weakened by 3.3% year-over-year in 2025, while the rand gained only 2.5% against the US dollar for the year.
This means that, in actual terms, the South African rand lost ground against the US dollar over the last year.
However, there were many positives regarding South Africa’s economy in 2025, which gives some reason for optimism.
South Africa has seen its credit default swap (CDS) rate lessen from a year ago, signalling a marked improvement in perceived risk for SA.
Investor sentiment has improved towards South Africa over the last few years, which can be seen in the bond rate.
The benchmark ten-year domestic bond yield is significantly lower, at 8.36% versus closer to 11% at the start of 2023.
The brightening economic growth outlook for South Africa saw accelerated recent gains in reducing investor risk sentiment towards the country.
Global investor sentiment improved significantly by the end of last year, with a general acceleration over the second half of 2025.
This includes expectations that returns will improve as markets become increasingly bullish on the United States’ Fed rate cuts.
Expectations for both the global and US economic outlooks have improved, as well as for South Africa.
US interest rate cut expectations have led to the weakening of the US dollar, which in turn has driven the rand stronger against it.
Two further US interest rate cuts are expected this year, which have helped in driving the rand to R16.53/USD, from R19.11/USD.
“In South Africa, while GDP rose by a modest 0.5% in Q 2025, it is expected to see stronger growth this year,” Bishop said.
“Phase two of Operation Vulindlela is expected to underpin the strengthening of economic growth to 3.0% year-on-year by 2030.”
She said the high degree of success of phase one of Operation Vulindlela has benefited investor confidence in South Africa.
Other positive factors include a lower inflation rate, achieved by reducing the target to 3.0% year-on-year, and lower interest rates, with expectations of further reductions.
“The moderation in country risk also helps lower short-term interest rates, as indicated by the recent S&P credit rating upgrade for South Africa,” she said.
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