South Africa FX
08 May 2025
FX Monthly Chart Book
Shireen Darmalingam
- The rand was particularly volatile in April, again taking its cue from local challenges and global economic developments. The rand was weaker than the dollar by the end of April; it lost against the euro and against the pound. It traded in an exceptionally wide range of R18.27/$ – R19.93/$. Emerging market currencies staged a mixed performance against the dollar: the BGN, RON, CZK, HUF and MXN were amongst the best-performing ones, with the ARS, TRY, ZAR, COP and IDR amongst the worst-performing.
- Uncertainty around President Trump’s trade policies saw the rand remaining volatile against the dollar in April, and hitting an 18-month low. Uncertainty around global trade policies has dominated since Liberation Day (2 April) when President Trump announced reciprocal tariffs, and noted that this would bring “stronger competition and lower prices for consumers” in the US. President Trump has since announced a 90-day pause on many of the tariffs he introduced. However, many of the steep tariffs on China remain in place, while those levied on most other countries have been reduced to a baseline 10% level. China faces tariffs of 145%. Trade talks between China and the US are expected to start this week, and will centre on de-escalation rather than a big trade deal.
- The rand was also affected by domestic politics in April, with the two biggest parties within the Government of National Unity (GNU) disagreeing over the National Budget, and the proposed VAT increase. This had led to investor concerns that the Democratic Alliance (DA) would exit the coalition. The risk of the DA leaving the GNU increased investor concerns about the function and stability of the GNU and, subsequently, economic growth and fiscal consolidation. Finance Minister Enoch Godongwana scrapped the planned 0.5 ppts increase in the VAT rate (planned for 1 May); it will remain at 15%. The Finance Minister has since announced that the third tabling of the Budget will take place on Wednesday 21 May 2025. Treasury will “focus on improving spending discipline across departments, improving both revenue collection and structural reform to stimulate investment and growth”. The announcement that VAT will no longer be increased in 2025 and/or 2026 eliminates National Treasury’s scope to provide further support for frontline services and/or economic growth. The Budget re-tabling will encompass a full legislative reset: the Fiscal Framework, Appropriation Bill, Division of Revenue Bill, and the previously tabled Rates and Monetary Amounts Bill will be presented to Parliament for approval. The rand will likely remain vulnerable in the lead-up to the new Budget being tabled.
- We see the rand averaging R18.31/$, R20.28/€, and R23.94/£ in 2025.
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