The support of domestic sentiment, lower inflation, getting off the greylist and a record gold price pushed the rand over the psychological R16/$ barrier.
The rand strengthened to below R16/$ for the first time in almost four years on Monday, 26 January, following the successful footsteps of the gold price, which breached $5 000 per fine ounce in the morning.
In volatile economic times, with geopolitics changing from day to day, this is good news for South Africa, although the strong rand is more a consequence of a weaker dollar and of stronger metal prices, including gold.
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Rand below R16/$ reflects mix of global and local dynamics
Sanisha Packirisamy, chief economist at Momentum Investment, says the rand breaching R16.00 to the US dollar reflects a mix of global and local dynamics, including a weaker US dollar pressured by de-dollarisation trends (echoed in robust central bank gold buying) and soaring precious metal prices.
She says a favourable commodity price mix supported the rand as a high-beta emerging market currency. In addition, other factors supporting the rand included:
- Domestic sentiment improving on well-behaved inflation
- South Africa’s removal from the Financial Action Task Force (FATF) greylist and the EU’s high-risk jurisdiction list
- An upward sovereign ratings momentum
- An improving growth trajectory, although from a low base, and expectations of further interest rate cuts.
“While structural challenges like fiscal pressures, logistics, and water issues persist, these tailwinds have propelled the rand’s rally.”
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Record gold price helped rand to extend winning streak, but can it stay there?
Bianca Botes, director at Citadel Global, says the rand already extended its winning streak last week, rallying to levels as strong as R16.12/$. “A confluence of factors has aligned in the local currency’s favour over the past weeks: record gold prices, improved fiscal metrics, a credible central bank and persistent dollar weakness.
“The question now is whether the rand can stay there after breaching the psychological R16.00/$ mark.”
Botes also points out that dollar weakness persists. “The US dollar Index (DXY) has fallen to 98.5, down roughly 10% from early-2025 highs of near 110. “Beyond Greenland, concerns over US Federal Reserve (Fed) independence persist after the criminal investigation into Fed Chair Jerome Powell.
“Former Fed Chairs Ben Bernanke, Alan Greenspan and Janet Yellen condemned the probe as an “unprecedented attempt” to undermine the central bank. The Fed’s Federal Open Market Committee (FOMC) meets on 27 and 28 January and is expected to hold rates steady, but its tone on future policy will be closely watched.”
Botes points out that these factors combine to create a compelling short-term case for further rand strength. “Technical indicators support the view that the $/R rate is trading below its 50-day, 100-day and 200-day moving averages. Momentum remains intact.”
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Softer dollar was important tailwind for the rand
Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), also applauds the rand’s extended strong run against the US dollar. “A softer dollar has been an important tailwind, alongside firm commodity prices, with gold and platinum both up by more than 5% per week, supporting South Africa’s terms of trade.
“In recent months, the rand also benefited from relatively high domestic yields and improved global risk sentiment, which helped compress currency volatility. While the rand appears comfortable at current strong levels and some market participants are calling for a move below R16/$, a level that technical dynamics could well test, it is harder to identify the fundamental catalysts required to sustain a materially stronger trend beyond this point.”
