💹 Major Currency Snapshot:
USDZAR: 18.29
EURZAR: 20.70
GBPZAR: 24.30
Introduction:
Insights into current global currency dynamics, highlighting the US dollar’s ongoing decline in dominance driven by factors like trade policies and expected Federal Reserve interest rate cuts, which is leading to a more fragmented international system. In contrast, currencies like the South African Rand are navigating this landscape with their own distinct drivers, showing recent resilience supported by domestic factors such as an improved trade balance and stable monetary policy.
Key takeaways from sources:
- The sources indicate a significant and potentially long-term decline in the US dollar’s dominance in the global financial system. This erosion of supremacy is driven by several factors, including US trade policies such as tariffs, the expectation of Federal Reserve interest rate cuts, and rising geopolitical friction. This trend is seen by some as a steady shift rather than a sudden collapse.
- This weakening dollar is contributing to a move towards a more fragmented international system, where influence is likely to be shared among a handful of credible currencies rather than being centered around a single dominant one. Central banks are already gradually reducing their reliance on the dollar.
- Asian currencies have been particularly active, with the Taiwan dollar experiencing a significant surge, which has led to speculation about possible revaluation as part of trade negotiations with the US. China’s yuan has also strengthened as Beijing promotes cross-border trade bypassing the dollar, and the Hong Kong dollar required substantial intervention to prevent it from strengthening beyond its peg to the USD.
- The Federal Reserve faces considerable uncertainty regarding its future monetary policy path, especially concerning interest rates. While the Fed was widely expected to keep rates steady in the immediate term, markets were pricing in multiple rate cuts later in the year. Tariffs introduce a challenge for the Fed by potentially increasing both inflation and unemployment, and there are divergent forecasts among economists and market participants on the number of expected rate cuts.
- In contrast to the US dollar’s struggles, the South African Rand has shown notable resilience and recovery in recent months. This strength is primarily attributed to a significant improvement in South Africa’s trade balance, which swung to a substantial surplus in February 2025, driven by a surge in exports and a decline in imports.
- The South African Reserve Bank’s (SARB) decision to maintain a tight monetary policy stance by keeping the repo rate at 7.50% also supports the Rand. This policy helps control inflation and provides an attractive interest rate differential for foreign investors.
- Forecasts suggest the Rand may continue its strengthening trend or stabilize in the short term, with potential for further modest appreciation over the next six months, contingent on factors like sustained trade surpluses, stable commodity prices, and appropriate monetary policy adjustments by the SARB.
Need a business partner that can help mitigate exchange rate risk?
Book an appointment with one of our treasury specialists.
If you are not subscribed yet, make sure to do so by clicking HERE and signing up.