Cape Town – The South African rand strengthened to R17.14/$ on Wednesday after weaker-than-expected US economic data raised expectations of a Federal Reserve interest rate cut in December, Reuters reported.
The dollar also fell 0.2% against a basket of currencies.
Sensitive to both global and domestic developments, the rand gained alongside South Africa’s Top-40 index, which rose 1.3%, while the yield on the 2035 government bond fell to 8.575%.
Investors are now awaiting local inflation, credit, trade, and budget data due later this week.
According to Business Tech, over the past year, the rand has strengthened against the US dollar, rising from R18.18/$ to R17.13/$, supported by positive domestic developments and concerns over US fiscal policy and low interest rates.
Despite these gains, the rand remains significantly undervalued, with the Big Mac Index suggesting it could be nearly 50% stronger, the report said.
Analysts caution that currencies can remain misaligned with their “fair value” for years, meaning South Africans should not expect a rapid correction.
South Africa’s market performance has been particularly strong in gold and platinum mining, with select local financial and mining stocks remaining attractive to investors.
However, the country still represents a relatively small share of the global emerging market, which limits foreign inflows. Overall, while the rand may continue to strengthen, reaching its “fair value” is unlikely in the near term.
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Compiled by Betha Madhomu
