The rand traded at 15.9925 to the dollar at 1229 GMT on Friday, about 0.8% stronger than its previous close and its strongest level since the United States and Israel launched attacks on Iran on 28 February. Bloomberg had the day's best at 15.9924 and the rand at 15.99 by 2:49pm in Johannesburg. It last closed below 16 in February, before the conflict began.
The Washington decision behind it
The decision that did it was taken in Washington. The US Treasury said it would double the size of its buybacks of longer-dated government securities over the next quarter, and Treasury Secretary Scott Bessent said he is prepared to expand those repurchases further and promised a new fiscal initiative. That weighed on the dollar and lifted the appeal of higher-yielding emerging-market currencies, of which the rand is one of the most heavily traded proxies. Gold, one of South Africa's main exports, rose to a more than three-month high on the same news and was on track for a third straight weekly gain. On the Johannesburg Stock Exchange the Top-40 index was up 2.2%, and the yield on the benchmark 2035 government bond eased to 8.56%.
Why traders are holding it
Matthew Ryan, head of emerging-market strategy at Ebury Partners, said the war premium has largely faded and the encouraging domestic story should reassert itself as the dominant driver. He expects the rand to grind stronger from here, underpinned by a hawkish Reserve Bank, ongoing energy reforms and solid underlying fundamentals. An improving local fiscal backdrop and rising precious metals prices are supporting it as well.
Calm helps too. Expected three-month swings in the rand against the dollar fell this week to their lowest since January, which makes the currency more attractive to investors who borrow cheaply in dollars to hold it, and it has returned 3.5% on that trade this month.
The rand got to Friday the hard way. It slumped to a four-month low in March as the Middle East conflict pushed oil prices higher, clawed some of that back, then lost ground again in July after the Reserve Bank surprised the market by holding interest rates instead of raising them.
Friday's level has not held. By Sunday morning the rand was quoted at about 16.02 to 16.03, back on the weak side of the line it crossed two days earlier.
