Several months ago, the rand seemed in freefall. In April, during the tariff-driven sell-off, it nearly breached R20 to the US dollar. By October it was trading near R17, its strongest point in over two years.
For a currency that often serves as the world’s favourite shock absorber, the turnaround is remarkable. Portfolio manager, Rashaad Tayob, explains what it means for investors.
The rand’s rebound began as part of a global retreat from the dollar. The greenback fell 7% in the second quarter as investors started to price in rate cuts by the US Federal Reserve. But the story became local. Since midyear, the dollar has steadied while the rand continued to climb – supported by foreign inflows into emerging markets and a powerful rally in gold and platinum prices.
Over the past quarter, the rand has outperformed most emerging-market peers and even commodity currencies such as the Australian dollar. For once, South Africa’s high real yields and trade surplus have combined with improving risk sentiment to support, rather than punish, the currency. The rand’s recovery played out against a backdrop of doubt about global paper currencies.
Gold has surged past successive records – first $3 000, then $4 000 an ounce – as investors hedge against the erosion of value in fiat currencies. The BRICS bloc, led by China, has been diversifying reserves into gold, prompting renewed talk of a future alternative to the dollar-based system.
Rising government debt across developed economies has supported that narrative. With little sign of fiscal restraint and central banks now cutting rates, investors are questioning how long fiat currencies can hold their value. Long-term bond yields in the US have risen even as policy rates fell, a subtle signal of unease about inflation and debt sustainability.
What it means for investors
The April sell-off was revealing. For decades, the dollar strengthened whenever global markets turned risk averse. This time, however, both risk assets and the dollar fell together – a sign that investors are looking elsewhere for safety. In the short term, caution is warranted after such a sharp rally in the metal and persistent bearishness on the dollar. Over the long run, diversification across currencies and into real stores of value like gold, is essential for protecting wealth in a world where money itself is being revalued.
