SA Rand Forecast: Hawkish SARB Outweighs FED, Keeps USD/ZAR Heading to R17
The South African rand gained traction last week, fueled by rising gold prices, supportive SARB policy, and cautious signals from the FED...
Quick overview
- The South African rand strengthened last week due to rising gold prices and a stable SARB interest rate.
- The U.S. Federal Reserve's recent rate cut and cautious outlook created a divergence in monetary policy that pressured the dollar.
- South Africa's foreign exchange reserves reached a record high, enhancing financial stability amid global volatility.
- Traders are closely watching upcoming inflation data and SARB's policy decisions, which could influence the rand's future trajectory.
The South African rand gained traction last week, fueled by rising gold prices, supportive SARB policy, and cautious signals from the Federal Reserve.
Fed Cut and SARB Hold Create Diverging Dynamics
The South African Reserve Bank (SARB) kept its benchmark interest rate unchanged at 7.50%, a move that continues to underpin the rand but places pressure on consumers and borrowers at home. Meanwhile, the U.S. Federal Reserve delivered a 25 basis point rate cut, but Fed Chair Jerome Powell’s cautious tone fell short of the dovish expectations markets had priced in.
The result was a sharp reaction in the U.S. dollar, briefly pushing USD/ZAR up to R17.50. Yet, the rally stalled at what is now firm resistance, flipping prior support into a ceiling and reinforcing bearish momentum for the pair.
Gold Rally Fuels Rand Momentum
South Africa, one of the world’s leading gold producers, benefited directly from last week’s surge in bullion prices. Gold advanced 4%, climbing above $3,500/oz and closing the week at $3,600.
Weaker U.S. payroll data and renewed safe-haven demand triggered the move, providing additional tailwinds for the rand. The consolidation below R17.50 in USD/ZAR confirmed the downward trajectory, with traders eyeing R17.00 as the next major downside target.
USD/ZAR Chart Monthly – The 50 SMA Has Been Broken
Technical Picture: Sellers Regain Control
The 200-week simple moving average (SMA) has repeatedly capped upside attempts, and once again USD/ZAR failed to sustain a breakout above it. Sellers quickly regained control, pulling the pair back toward its lowest levels of 2025.
Since peaking just below R20 in April, USD/ZAR has been in a clear downward trend, and last week’s rejection strengthened the bearish case. Unless the pair can break convincingly back above R17.50, the path of least resistance appears lower.
USD/ZAD Chart Daily – MAs Continue to Keep the Trend Down
Domestic Data Shows Mixed Signals
While the rand is enjoying external support, South Africa’s domestic economy presents a more nuanced picture.
- Current Account: The deficit widened from 0.6% to 1.1% of GDP in Q2 2025.
- GDP Growth: Mining and manufacturing recoveries pushed growth to its fastest pace in two years.
- Inflation: CPI remains at its highest level since September 2024, leaving economists split on whether SARB will extend rate cuts or pause to reassess.
Traders now turn their attention to this week’s key data releases: the CPI print on Wednesday and SARB’s policy decision on Thursday.
Foreign Exchange Reserves at Record Levels
South Africa’s external position has further strengthened. Gross foreign exchange reserves rose to an all-time high of $70.42 billion in August, up from $69.16 billion the previous month.
- Gold Reserves: Increased to $13.76 billion.
- SDR Holdings: Climbed to $6.50 billion.
- Foreign Currency Holdings: Rose to $50.16 billion.
These record reserves bolster financial stability and provide the rand with a valuable buffer against global volatility.
Outlook: Bearish USD/ZAR Bias Persists
The combination of elevated gold prices, record reserves, and a relatively supportive SARB stance continues to favor the rand. With USD/ZAR capped below resistance and sellers in control, the pair’s next move may test the R17.00 handle.
Still, much will depend on this week’s inflation reading and SARB’s tone on future policy—two catalysts that could determine whether the rand’s rally extends or stalls.
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