Local pockets of optimism

In the ever-shifting landscape of global currency markets, recent movements in the South African rand have once again sparked conversations about its resilience against the United States dollar (USD).

However, on closer examination, it becomes evident that the rand’s fluctuations are more closely tied to the strength of the USD itself rather than inherent weaknesses in South Africa’s currency.



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The USD has recently surged to its highest level in nearly three months against a basket of currencies buoyed by a series of robust economic indicators coming out of the US. Federal Reserve Chair Jerome Powell’s comments dismissing early and steep interest rate cuts further bolstered confidence in the greenback.

Traders, as indicated by the CME FedWatch tool, have significantly scaled back their expectations of rate cuts, with only a slim 16% chance priced in for March, which is in stark contrast to the 69% probability at the beginning of the year.

This shift in sentiment has led to recalibrations in anticipated rate reductions for the year, with expectations now hovering around 1.15%, down from the previously forecasted 1.5%. The implications of these developments extend beyond the borders of the US, reverberating across global markets.

Chinese stocks, for instance, experienced their most significant single-day gain since 2022, accompanied by a rise in the yuan. These movements signal a concerted effort by Chinese authorities to shore up their economy and stabilise volatile markets.

Local ramifications

Within SA, the ramifications are profound, given our twin fiscal and current account deficits. These vulnerabilities render South African assets particularly sensitive to fluctuations in USD-denominated metrics and US rate decisions.

However, the prospect of improved global commodity prices in 2024 offers a glimmer of hope, potentially mitigating some of these pressures. Additionally, the anticipated trajectory of falling global interest rates could provide further respite to South African assets in the coming months.

Despite the external challenges, there are pockets of optimism within the South African market.

Opportunities for high-quality investments persist, particularly among domestic companies poised to benefit from an improving earnings outlook.



The spectre of load shedding, which plagued the country in 2023 owing to electricity shortages, has somewhat receded with the gradual introduction of private-sector electricity generation and increased adoption of alternative energy sources.


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Nevertheless, the looming general election somewhere between mid-May and August introduces a new layer of uncertainty. Potential political shifts and their impact on reform agendas underscore the need for cautious optimism when navigating SA’s investment landscape.

On a more positive note, the tourism sector continues to show resilience, with a significant uptick in overseas visitors observed in recent months. The weakening rand, coupled with moderate inflation, has made SA an attractive destination for international travellers. The affordability of local goods and services relative to other countries further enhances SA’s appeal, making it a compelling option for budget-conscious tourists.

In conclusion, while the recent depreciation of the rand against the USD may raise concerns, a deeper analysis reveals a complex interplay of global economic forces. SA’s fortunes remain intricately linked to developments on the global stage, underscoring the need for a nuanced understanding of market dynamics and a cautious yet optimistic approach towards investment opportunities.


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Dr Francois Stofberg is senior economist at Efficient Wealth and managing director of Efficient Private Clients. 

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