It’s easy to forget that, just a year ago, the rand was trading at nearly R20 to the US dollar. At the end of the first quarter of 2026, the South African currency is holding steady at around the R16.50/$ mark.
Corporate treasurers now find themselves navigating a strong rand in a highly volatile market, characterised by geopolitical upheaval, sharply higher oil prices and deep uncertainty around inflation.
For corporate treasurers, the most prudent response to rand strength depends on which side of the market you’re on. For a very long time in South Africa, if you were an exporter, you didn’t have to do much to gain from the weaker currency. Exporters typically waited until they reached the right levels and executed their currency hedging then.
As a result, they didn’t have to think too much about which instruments to use to enjoy the benefits of the currency and their hedges. And because the rand was on a weakening trajectory, they benefited on the cash flow front, too.
Right now, with the rand holding well below the R17/$ mark, it’s the reverse for importers. For years, whether you’re a retailer, in the automotive industry or in any sector reliant on imports, a persistently weak rand has been a headache for importers. It disrupted margins and costings.
STRONG RAND
With the rand stronger and trading below R17/$, these businesses can finally breathe easier. Many of Absa’s importer clients have hedged their positions to secure strong levels.
Our advice to importer clients: use periods of strength to reset your currency hedging approach. Adopt a more proactive strategy. Capture current rand strength, position for possible rand weakening and hedge against volatility.
A stronger rand has several effects on South African businesses. South Africa remains a commodity-driven economy. Over time, rand strength is often supported by higher commodity prices, particularly precious metals. Commodities exporters may be stable because, although they receive fewer rand per dollar, their exports are more valuable.
However, South Africa is also a consumer-driven economy. In the long term, a stronger currency is good news for consumers and industries that depend on imports, such as manufacturing and retail. Over the longer term, a stronger currency supports lower inflation and consumer spending, which may benefit growth and employment.
Overall, there will be some short-term pain as exporters adjust to the stronger currency. In the long term, though, a stronger rand will be good for the structural integrity of South Africa’s economy and for many businesses.
CURRENCY RISK MANAGEMENT
But history shows that, despite the rand’s continued strength, it remains vulnerable to unexpected spikes. The US-Israeli war in Iran is a live example of this. Current market sentiment leans toward the rand trending relatively strong, but risks remain – especially around oil prices, and the knock-on effects of inflation. The war in Iran, if prolonged, may result in more persistent dollar strength as investors move away from emerging markets towards safehaven assets.
What makes our jobs interesting as financial markets professionals is that we help our clients navigate through turbulence. Every day is different in currency markets. We know that many factors drive the rand’s value: commodity prices, global inflation and so on. For exporters, our advice is: don’t panic.
Pick your levels. Work with your bank to achieve your updated target levels. For importers, it’s time to take a fresh look at how you approach currency risk management.
And for both exporters and importers, the key is to avoid binary, all-in bets and instead build a disciplined, programmatic hedging approach.
CORPORATE TREASURERS
The biggest takeaway for corporate treasurers is to make sure that you have an appropriate hedging policy. If you don’t have one, set one. If you have an old one, dust it off and update it. Your hedging policy must be communicated up at board level, because your actions as a corporate treasurer are highly significant to the organisation’s cashflow position.
The hedging instruments you use, and how and when you implement them are more crucial now than they’ve ever before. In volatile markets, corporate treasurers are at the centre of a vital three-way partnership between themselves, their boards and their banking partners. All three parties should work together closely to ensure alignment on the hedging policy.
Ultimately, our recommendation is to stay calm, communicate frequently and make decisions based on the latest information. Things change daily – as recent events have reminded us. There’s never a dull day in currency markets, especially not now.
There’s much we don’t yet know, like the inflationary impact of President Donald Trump’s tariffs, the lingering effects of the oil price hike, or future rate adjustments from the US Fed.
Monitor these developments with your bank, as they will affect currency and commodity prices, and will guide how you implement your hedging policies.
