South African Rand Loses Ground

The South African rand strengthened further to around 16 per USD, lifted by the rebound in prices of precious metals, particularly gold and platinum, South Africa’s key exports. Kevin Warsh’s nomination by President Trump to replace Jerome Powell as Fed chair prompted a rapid selloff in precious metals, as traders swiftly adjusted positions amid concerns over the future of US monetary policy. The currency is up about 3% so far this year, adding to gains of around 12% in 2025, supported by commodity prices and a combination of factors, including structural reforms, fiscal consolidation, credible monetary policy, and a stable governing coalition.

The South African rand firmed 0.5% from an earlier low of 16.3 per USD to trade near 16.1 on Monday, as sharp declines in key precious metals and base metals prices moderated. Bullion plunged as much as 10% and silver tumbled as much as 16%, extending Friday's selloff triggered by US President Donald Trump’s pick of Kevin Warsh as the next Federal Reserve Chair, widely seen as a more hawkish choice. At the same time, investors weighed encouraging domestic data. The seasonally adjusted Absa Purchasing Managers' Index (PMI) in South Africa rose by 8.2 points to 48.7 in January, marking a significant recovery from December’s slump to 2020-lows, although staying in contraction. On the monetary policy front, the South African Reserve Bank (SARB) maintained its repo rate unchanged at 6.75% in January, saying inflation remains well within target but highlighting risks from global tensions and potential food and electricity price pressures.

The South African rand depreciated more than 1% to around 15.9 per USD, pressured by retreating gold prices and a firmer US dollar. However, the currency remained close to June 2022-highs, amid positive domestic fundamentals and elevated prices for commodities, particularly precious metals and base metals. Meanwhile, the South African Reserve Bank left the benchmark interest rate at 6.75% at its first meeting of 2026, after a 25 bps rate cut in November, signaling a balanced stance on global risks and confidence in the current inflation trajectory. The decision followed a downward revision to the 2026 inflation forecast to 3.3%, closer to the new 3% target amid an improved inflation outlook.