Many South Africans were hopeful that their local currency would mirror this decline, allowing them to capitalise on the weakening greenback
Image: Armand Hough/Independent Media
South Africans who expected to score massively from the fact that the greenback has lost 10% against every other major currency this year are set for a sore surprise because the rand has barely budged against the dollar year-on-year.
In fact, investors would have been better off putting R10,000 into pounds or even euros, with euros having provided the best return of R555.67 – or 5.6% year-on-year, IOL’s calculations show.
Based on a linear equation that doesn’t include transaction costs, fees, or reinvestment of gains, the pound would have provided a return of R405.12, or 4.1%.
While the rand had been gaining against the US currency given the greenback’s weakness, the exchange rate went over R18 to the dollar again this week – effectively on par with a year ago. As a result, a R10,000 investment into the dollar would provide a negative return.
Andre Cilliers, currency strategist at TreasuryONE, explained that the rand had lost ground as the dollar firmed and there was uncertainty over any US military action against Iran, which is keeping the local currency on the back foot for now.
US President Donald Trump has variously indicated he would support Isreal in its fight against Iran, while also stating that this may not happen.
Bloomberg data indicated that, since Trump was inaugurated for his second term on January 20, the greenback has declined in value against the euro, pound and Swiss franc. This, it stated, was due to Trump’s tariffs and his insistence that Federal Reserve Chaiman Jerome Powell lower interest rates. The Fed voted overnight to keep rates unchanged, the same position for all of 2025 so far.
The last time the dollar plunged this much and this fast was in 2010 when the US Federal Reserve pumped more money into the economy to help deal with the ravages of the 2008 Global Financial Crisis, Bloomberg data showed.
South Africa’s rand is notoriously volatile.
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