South Africa FX
04 June 2025
FX Monthly Chart Book
Shireen Darmalingam
- The rand had yet another volatile trading month in May. However, it ended the month stronger, at R18.00/$, compared to R18.60 at the end of April. This translates into a gain of 3.4% in May. The rand was also stronger against the euro, gaining 3.4%, and 2.5% stronger against the pound. It traded in a wide range of R17.75/$ – R18.70/$. Emerging market currencies staged a mixed performance against the dollar: joining the ZAR were the TWD, RUB, KRW and IDR as best-performing EM currencies; the TRY, RON, ARS, INR and HKD were amongst the worst-performing EM currencies.
- Uncertainty around President Trump’s trade policies saw the rand remaining volatile against the dollar in May. President Cyril Ramaphosa held talks with US President Trump in May in a bid to ease tensions between the two nations. While it remains to be seen whether the SA trade/investment package will be received well, President Ramaphosa noted that the meeting had gone well, with President Trump agreeing that the US should participate in the upcoming G20 Summit scheduled for November in Johannesburg. SA has since offered to buy liquefied natural gas from the US in a proposed deal worth around $1bn (R17.9bn) a year as part of a trade deal. The proposed deal would allow duty-free imports of automotive components from South Africa for US car production. Further, the deal would exempt SA from paying duty on exports of 40,000 vehicles a year to the US as well as 385,000 tonnes of steel and 132,000 tonnes of aluminium. The terms are still to be finalised. The rand will likely remain vulnerable while trade policy is being shaped by the Trump administration.
- The rand was also once again affected by domestic politics in May. Finance Minister Enoch Godongwana tabled the third iteration of Budget 2025 in May. The budget remained committed to fiscal consolidation; specifically, the debt-GDP ratio still peaks in this fiscal year (FY25/26), and bond issuance was kept unchanged in the third iteration. Further, the initial proposed VAT increase was scrapped. The finance minister, however, announced some revenue adjustments which include both the reversal of some of the tax relief previously proposed and unspecified future tax hikes (see Budget 2025- Committed to fiscal consolidation for more detail). This third budget iteration was better received by the parties within the GNU, which had previously rejected the second iteration of the Budget in March, as well as by the market.
- We see the rand averaging R18.24/$, R20.39/€, and R24.07/£ in 2025.
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