Rand Weakness Is About the US Dollar, Not South African Politics

Economics Desk

– October 28, 2026

2 min read

The South African rand has come under renewed pressure against the United States (US) dollar as international investors increasingly price in stronger American economic growth and the likelihood of further interest rate hikes by the US Federal Reserve (Fed).

Having traded at near R16.00 to the US dollar in early September, the rand weakened to around R16.70 against the dollar earlier in October, before recovering some ground. On Monday, it traded near R16.61. The broader movements have been driven principally by developments in international financial markets rather than domestic South African political events.

Bheki Mahlobo, in-house economist at The Common Sense, says, “At the centre of the shift is the strength of the American economy … stronger growth and still stubborn inflation have encouraged investors to revise their expectations for US interest rates upwards … we now anticipate another Fed rate increase in December, following September’s increase, with further tightening possible in 2027.”

As a consequence, says Mahlobo, the US dollar index has lifted, and on the chart below, it becomes clear how the movement in that index has been the principal driver of rand weakness. The index tracks the strength of the dollar. All else being equal, when the dollar lifts, the rand loses ground.

Higher expected interest rates increase the attractiveness of US government bonds and other dollar-denominated investments. This raises demand for dollars while reducing the relative appeal of emerging-market assets, including the rand.

The dollar’s strength is therefore not unique to its relationship with the rand. Other currencies have also weakened as investors adjust to the prospect of higher American interest rates and stronger US economic performance.

This distinction matters because currency depreciation is often interpreted as a verdict on South Africa’s domestic political or economic circumstances. While those factors remain important to the rand’s longer-term outlook, there is little evidence at this stage that domestic political developments are the principal cause of its recent weakness.

That is something that has concerned The Common Sense of late, with the newspaper publishing an analysis earlier this week arguing that bond yields seemed out of whack with the domestic fiscal and political outlook.

However, markets seem set to price South Africa on the view that a weakening African National Congress is a net positive for the country and that the Government of National Unity will hold while President Cyril Ramaphosa remains in office. For as long as that view holds, the rand’s direction is likely to depend more on incoming American economic data and the US Fed’s interest rate decisions than on developments in Pretoria. A further strengthening of US growth and interest rate expectations could keep the rand under pressure, even without any deterioration in South Africa’s domestic political environment.