Rand's remarkable recovery: How US-China trade talks are boosting South Africa's currency

IOL News

12-05-2025

Following a temporary dip due to geopolitical tensions, the rand has rebounded
Image: Picture: Henk Kruger/Independent Newspapers
South Africa's local currency, long known as one of the most volatile in the world, is on its longest winning streak this year, buoyed by positive signals of a US deal with China that could benefit exports from this country to China.
As of Monday early afternoon, the rand was trading at R18.30 after having started the morning off at R18.21. This, based on Morningstar data, is among its best levels this month after it went as low as R18.19 last Tuesday.
At the beginning of the year, the currency was at R18.82 and saw a nasty spike around April 8, when it shot up to R19.76 on the back of US Donald Trump's tariff announcement.
On Friday, Wichard Cilliers, director and head of market risk at TreasuryONE, said the currency was on its strongest winning streak this year, boosted by expectations that US-China trade talks could benefit global trade and South Africa, whose economy is heavily reliant on exports to China.
Investec chief economist, Annabel Bishop on Monday, noted that the currency was, in fact, 'more settled recently,' with the financial institution expecting it to reach as low as R18 to the dollar for the three months to end-June.
Bishop noted that the dollar recouped some strength on the back of weekend trade talks between the world's two superpowers. Yet, she cautioned, it could still see volatility.
'Markets have benefited from the US and China reaching a trade deal over the weekend, with reciprocal tariffs reported to fall by 115%, and a 90 day pause on the recent new tariffs, with room for further negotiations,' said Bishop.
Trump highlighted the meetings as a 'total reset' in US China trade relations, with other officials noting 'a great deal of productivity' and that 'it's important to understand how quickly we were able to come to an agreement,' Bishop said in a note.
Cilliers, however, noted that more details on the trade talks would likely still emerge.
Nolan Wapenaar, co-chief investment officer at Anchor Capital, told IOL that terms of trade have turned positive for South Africa as the cost of oil comes down and the value of gold increases.
'As long as this persists, the rand will trade with a positive overhang,' he said. This comes off the back of 'significant weakness in the VAT own goal and the Trump tariffs,' Wapenaar said.
'It appears, for now, that the risks are receding on both fronts. Therefore, we expect some recovery of the early April weakness,' Wapenaar said. These factors, along with South Africa's more positive international trading position, means that the local currency could strengthen toward the high R17s against the dollar.
Bishop, however, said that the local currency will be dependent on international events.
'The improvement in market expectations now over global and US economic growth has added to the rand's recent strength, as risk aversion has dropped from elevated levels in earlier weeks, although risks remain to the downside,' Bishop said.
IOL