The rand’s three-year high is bringing a festive hangover cure
The rand's 14% appreciation this year marks the rand's best annual performance since 2009.
Image: Freepik
South Africans are finding some much-needed breathing room in their wallets as the rand stages a remarkable recovery, trading at its strongest levels in more than three years.
As of Monday, January 12, the local currency was hovering near R16.42 per US dollar, a far cry from the volatility that has plagued it in recent years.
This 14% appreciation this year marks the rand's best annual performance since 2009. Andre Cilliers, currency strategist at TreasuryONE, has noted that the currency remains resilient in the face of global geopolitical concerns.
“Once again, record precious metal prices and strong investor confidence are providing good support for the local currency,” he said.
Investec chief economist Annabel Bishop said in a note that “the rand continues to see strength in its own right this year”.
This compares with 2025, when it rose 2.5% year-on-year, and the US dollar weakened by 3.3%.
In addition, said Bishop, South Africa has seen some reranking of its risk from financial market investors.
Moreover, “increased military conflict around the globe in the northern hemisphere in particular, has likely boosted risk-taking towards South Africa this year, given its removed geographic position, although all countries around the world are under US scrutiny,” said Bishop.
While the currency’s strength is a boon for the broader economy, its most immediate impact is being felt at the fuel pumps and in the cost of imported goods.
Fuel relief at last
According to a media statement from the Department of Mineral and Petroleum Resources, a broad-based fuel price reduction took effect on Wednesday, January 7. The department attributed this to a combination of lower global Brent crude prices and a strengthening rand.
The department noted that the rand’s appreciation – from an average of R17.23 to R16.85 during the review period – shaved more than 20 cents per liter off the basic fuel price across all categories.
This translated into a 62 cents per litre decline for 93 ULP and LRP petrol, while 95 ULP and LRP dropped by 66 cents per litre. Diesel users benefited the most, with the wholesale price of 0.05% sulphur diesel falling by 137 cents per litre and 0.005% sulphur diesel decreasing by 150 cents per litre.
Easing the inflation burden
The stronger currency is doing more than just lowering the cost of a tank of petrol; it is fundamentally shifting the country's inflation outlook.
Johann Els, chief economist at PSG Financial Services has said that the rand is among the factors that are positively impacting the economy.
Els also cited lower inflation, lower interest rates, and the positive impact of consumer spending.
Bishop has indicated that the South African Reserve Bank may cut interest rates twice this year.
Only one 0.25 percentage point cut in the repo rate is fully factored in by financial markets for South Africa this year, expected in March.
A second, at the same level that could come through in September, is only partially factored in, which has supported investor sentiment towards the rand further, Bishop said.
South Africa has cut its interest rates by 1.50 percentage points since September 2024. The current prime lending rate is 10.5%.
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