South African Rand Hits 3-1/2-year High

The South African rand traded around 16 per USD, approaching the highest since June 2022, mainly supported by a rebound in prices of key precious metals, particularly gold. Meanwhile, South Africa’s inflation rate eased to 3.5% in January from 3.6% in December, though less than the expected 3.4%, reducing expectations of a potential interest rate cut when policymakers meet next month. The South African Reserve Bank kept the benchmark rate at 6.75% in January, citing global uncertainty and the risk that rising food and electricity prices could push inflation above the revised 2026 forecast of 3.3%. With the new target set at 3%, sustained moderation in inflation will be essential before any rate cuts. A combination of structural reforms, fiscal consolidation, credible monetary policy, and a stable governing coalition continued to bolster the currency.

The South African rand weakened toward 16.1 per USD, the lowest in over a week, pulled down by a stronger US dollar and falling prices of key precious metals, particularly gold and platinum. Meanwhile, traders assessed the latest domestic economic data. South Africa’s unemployment rate fell to its lowest level in over five years at 31.4% in Q4 2025, down from 31.9% in the previous period. Despite the recent decline, unemployment remains extremely high, with over 8.4 million people seeking work, highlighting the country’s persistent job crisis. The attention now turns to the upcoming inflation report due on Wednesday. President Ramaphosa recently reiterated plans to accelerate reforms to boost growth, attract investment, and improve public-sector efficiency, measures that could aid job creation. Further details are expected in Finance Minister Godongwana’s annual budget on February 25.

The South African rand traded around 16 per USD, holding close to the highest since June 2022, bolstered by improving domestic fundamentals and upbeat sentiment ahead of the 2026 Budget announcement later in the month. The recent surge in commodity prices, particularly gold, platinum, and silver, has positioned South Africa to reap a significant windfall. On the monetary policy front, the South African Reserve Bank kept its repo rate unchanged at its January 29 meeting, reflecting confidence that inflation remains contained within the revised target framework. In the meantime, President Ramaphosa recently announced significant reforms in the electricity sector and pledged military support to combat organized crime, which he described as a pressing threat to economic growth. Persistently high unemployment also continues to constrain long-term growth potential. Traders now look to South Africa’s Q4 2025 unemployment rate and inflation data for a more complete picture of the economy.