SA Rand Forecast: USD/ZAR Continues Lower Amid Gold Rally and Soft Dollar
The South African rand strengthened further last week, supported by a combination of steady U.S. inflation data, firm local policy...
Quick overview
- The South African rand strengthened due to steady U.S. inflation data, firm local policy, and rising gold prices.
- The U.S. PCE inflation report showed no renewed price pressure, contributing to the dollar's weakness and supporting the rand.
- The South African Reserve Bank maintained its benchmark rate at 7.50%, signaling policy confidence and bolstering the rand.
- Record foreign exchange reserves of $70.42 billion enhance South Africa's financial stability and confidence in the rand.
The South African rand strengthened further last week, supported by a combination of steady U.S. inflation data, firm local policy, and rising gold prices. USD/ZAR touched a fresh low at R17.23, its strongest level in months.
PCE Data Anchors Dollar Weakness
The highlight of last week’s market activity was the U.S. PCE inflation report, which came in line with expectations and showed no renewed price pressure. The softer U.S. dollar enabled USD/ZAR to maintain its downward momentum throughout most of the week.
USD/ZAD Chart Daily – MAs Continue to Keep the Trend Down
While the Federal Reserve trimmed rates by 25 basis points, Chair Jerome Powell’s cautious remarks failed to meet investors’ dovish expectations. The brief uptick in the dollar pushed USD/ZAR back to R17.50, but the bounce faltered at this newly formed resistance level, reinforcing the pair’s broader bearish trend.
SARB’s Steady Hand Supports Rand
The South African Reserve Bank (SARB) kept its benchmark rate unchanged at 7.50%, providing ongoing support for the rand even as it added pressure on local borrowers. Traders interpreted SARB’s steady stance as a signal of policy confidence, offering further tailwinds to the currency.
Gold Rally Adds Fuel to Rand Momentum
South Africa’s status as a leading gold producer meant it benefited directly from the latest 4% surge in bullion prices. Gold closed the week at $3,600/oz, driven by softer U.S. payroll data and a revival of safe-haven demand.
This rise in gold prices gave the rand additional strength, helping USD/ZAR consolidate below R17.50 and setting the stage for a potential retest of the R17.00 threshold if selling pressure persists.
Technical Outlook: Resistance Holds, Sellers Regain Control
USD/ZAR failed again to break above the 200-week simple moving average (SMA)—a key technical barrier that has repeatedly capped rallies. The pair swiftly retreated to its lowest levels of 2025 as sellers tightened their grip, leaving the path of least resistance pointing lower unless the exchange rate can reclaim the R17.50 level decisively.
Domestic Indicators Paint a Mixed Economic Picture
South Africa’s internal data showed a nuanced backdrop for the rand. Current account deficit widened from 0.6% to 1.1% of GDP in Q2 2025, GDP growth hit its fastest pace in two years, aided by a recovery in mining and industrial activity.
Consumer inflation eased to 3.3% in August, thanks to softer food prices, but remains above last year’s levels, keeping debate alive over SARB’s future rate path. Markets now turn their attention to this week’s key domestic events—Wednesday’s CPI release and Thursday’s SARB policy announcement—for fresh clues on the central bank’s outlook.
Record Foreign Reserves Bolster Stability
South Africa’s external balance sheet continues to improve. Gross foreign exchange reserves rose to an all-time high of $70.42 billion in August, up from $69.16 billion previously.
- Gold reserves: climbed to $13.76 billion.
- Foreign currency holdings: advanced to $50.16 billion.
- SDR holdings: dipped slightly to $6.50 billion.
These record reserves enhance financial stability and offer a crucial buffer against global volatility—further strengthening confidence in the rand.
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