USD/ZAR today: rand slides 1.2% to seven-month low near R17 before SARB decision

The South African rand fell about 1.2% to R16.975 per US dollar on Friday afternoon, its weakest level in roughly seven months, as hot US inflation data lifted the dollar. The move left USD/ZAR within touching distance of R17 ahead of a heavy local week: October inflation on Wednesday and the Reserve Bank’s interest rate decision on Thursday, 19 November.

The day started calmly. In early trade the rand was steady at 16.7550 per dollar, helped by softer oil and gold and platinum prices that were up more than 1%. By 14:05 GMT it had slipped to 16.9750, about 1.2% weaker than its previous close, according to Reuters. Trading Economics data shows USD/ZAR ending the session around 16.93, up 0.98% on the day.

Why is the rand weaker against the dollar today?

The short answer is the US, not South Africa. Reuters linked the slide to US producer prices, which rose further in October and posted the largest annual gain in four years. That keeps alive expectations that the Federal Reserve will keep raising rates after a widely expected hike next month.

Earlier in the week, US consumer prices rose 0.4% in October, above forecasts. Markets now treat a December Fed hike as close to certain, with CME FedWatch odds reaching 100% for the 9 December meeting, and the dollar index at a 19-month high. When US rates are expected to rise, money tends to flow out of higher-risk emerging market currencies such as the rand and into dollar assets.

The rest of the dollar bloc told the same story. The euro sat near $1.10 and the yen tested 160 per dollar, which we cover in our EUR/USD forecast and dollar wrap. Bitcoin also slipped below $69,000 as the strong dollar bit. On WiseProp Trader, 22 of the 24 GBP/USD trades placed on Friday were sells, a sign that traders were positioned for dollar strength.

What else moved in South African markets?

Local assets weakened with the currency. The JSE Top-40 index was down 0.7%, and the yield on the benchmark 2035 government bond rose 5 basis points to 8.545%. Higher yields mean lower bond prices.

There were offsets. Gold and platinum, two of South Africa’s biggest exports, were firmer, and oil was heading for a second weekly decline. As a net importer of fuel, South Africa benefits when oil eases, because it takes pressure off the import bill and pump prices. Those supports kept the rand stable in the morning but were not enough once the US data landed.

What do analysts expect from the SARB rate decision on 19 November?

The Reserve Bank raised the repo rate by 25 basis points in September, taking it to 7.25%, with prime at 10.75%. Reuters said the bank cited persistent price pressures tied to the war in Iran.

Economists are split on what comes next. Nedbank said in late October: “we expect the Monetary Policy Committee to raise interest rates by 25 basis points at its November meeting.” Old Mutual Wealth strategist Izak Odendaal called further hikes “probably unnecessary and unlikely”, and Investec’s Annabel Bishop also argued against a hike, as reported by Business News South Africa. Treasury’s temporary fuel levy relief, costed at R10 billion, could soften the near-term inflation numbers the MPC sees.

For the rand, the gap between South African and US rates matters. If the Fed hikes in December and the SARB holds, that gap narrows, which can weigh on the currency. If the SARB hikes too, the gap is preserved. That is why Wednesday’s inflation print is likely to move the rand before the decision is even announced.

Is the rand’s slide a sign of local trouble?

Not on Friday’s evidence. The morning was steady, commodity prices were supportive, and the selling started after US data. The rand is one of the most traded emerging market currencies, so it often reacts first when global investors cut risk. A seven-month low is a meaningful level, but the move so far is about the dollar’s strength across the board rather than a South Africa-specific shock.

The R17 level is now the line many traders will watch. The rand last traded weaker than that in April, according to Reuters. A break would mark a new low for the period; a rebound would depend largely on US data cooling or the SARB sounding firm on inflation.

What should traders watch next?

• Tuesday 17 November: US retail sales for October, a test of how strong the US consumer remains.
• Wednesday 18 November: Stats SA’s October consumer inflation and the Fed’s October meeting minutes.
• Thursday 19 November: The SARB rate decision, due at about 15:00 SAST.
• Oil, gold and platinum: the commodity cushion that kept the rand steady before the US data.

For more coverage, see our South Africa markets hub, and read how South African fintechs Yoco and Lumepay raised fresh funding this week.

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This article is for education and information only and is not financial advice. Figures are as reported by the sources linked above.