SA Rand Forecast: USD/ZAR Breaks 2025 Lows, Eyes R17 Ahead of FED and SARB
The South African rand advanced strongly last week, breaking key levels as dollar weakness and rising gold prices reinforced bearish...
Quick overview
- The South African rand strengthened last week due to dollar weakness and rising gold prices, breaking key support levels in the USD/ZAR pair.
- Despite a widening current account deficit, South Africa's GDP growth accelerated, driven by a recovery in mining and manufacturing.
- The Federal Reserve's dovish signals and disappointing U.S. labor data contributed to the dollar's decline, further boosting rand buying.
- South Africa's foreign exchange reserves reached a record high, enhancing the rand's stability against global market fluctuations.
The South African rand advanced strongly last week, breaking key levels as dollar weakness and rising gold prices reinforced bearish momentum in USD/ZAR, while this week the attention in on the FED and the SARB.
Rand Gains on Dollar Weakness and Gold Surge
The South African rand extended its rally last week, supported by dovish signals from the Federal Reserve and a powerful upswing in gold prices. These factors weighed heavily on the U.S. dollar, pushing USD/ZAR below a major support level. The break opens the door for further declines in the currency pair, as bearish sentiment takes firmer hold.
USD/ZAR Chart Monthly – The 50 SMA Has Been Broken
USD/ZAR once again failed to sustain a move above the 200-week simple moving average, a level that has capped rallies three times now. Sellers quickly regained control, driving the pair to its lowest levels of 2025. With the price slipping under the R17.50 zone, traders are eyeing R17.00 as the next key downside target. The technical breakdown reinforces the bearish continuation trend that has been in place since April, when the pair peaked just below R20.
Fed Policy Hints and U.S. Data Pressure the Dollar
Despite hotter U.S. inflation data, the dollar struggled last week as jobless claims reached their highest levels since 2021. Traders interpreted the labor market weakness as another reason for the Fed to ease policy. Chair Jerome Powell’s September remarks about potential rate cuts fueled expectations, knocking the dollar nearly 1% lower against a basket of major currencies. This weakness, combined with stronger commodity demand, further amplified rand buying.
Gold Prices Boost South Africa’s Currency
As one of the world’s largest gold producers, South Africa benefits directly when bullion rises. Last week, gold surged 4%, surpassing $3,500/oz and touching $3,600 by Friday. The rally was fueled by global demand for safe-haven assets and disappointing U.S. payrolls data. The stronger gold backdrop coincided with the USD/ZAR break below R17.50, cementing the bearish momentum in the pair.
Economic Growth and Domestic Data in Focus
The South African Reserve Bank reported that the country’s current account deficit widened from 0.6% to 1.1% of GDP in Q2 2025. Yet, this did not weigh on the rand, as GDP growth accelerated at its fastest pace in two years thanks to a mining and manufacturing recovery. Traders are now awaiting this week’s CPI print on Wednesday and the SARB policy decision on Thursday. With inflation running at its highest level since September 2024, economists remain split on whether the central bank will extend its rate-cutting cycle or pause to reassess.
USD/ZAD Chart Daily – MAs Continue to Keep the Trend Down
Policy Easing Cycle Still in Play
Since September 2024, the SARB has lowered interest rates by 125 basis points, bringing the repo rate down from 8.25% to 7.00%. The prime lending rate has also fallen from 11.75% to 10.50%. While easing has been gradual, policymakers have only paused once this year, in March 2025, suggesting the central bank remains open to further cuts if economic conditions allow.
Foreign Exchange Reserves Reach Record High
Adding further support to the rand is South Africa’s improving external position. Gross foreign exchange reserves climbed to a record $70.42 billion in August, up from $69.16 billion in July. The increase was fueled by higher foreign currency holdings ($50.16 billion), a rise in gold reserves ($13.76 billion), and stronger Special Drawing Rights allocations ($6.50 billion). These buffers enhance the country’s financial stability and give the rand an additional layer of support against global market volatility.
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