South Africa’s currency has taken a notable knock, with the rand sliding in global rankings following heightened tensions in the Middle East. According to Annabel Bishop, the rand has weakened by 3.5% against the US dollar since the conflict began, placing it among the poorest-performing emerging-market currencies.
The local unit was trading at R16.34 to the dollar, reflecting sustained pressure as global investors shift toward safer assets. The trade-weighted rand has also declined by 2.6%, underscoring broader weakness beyond bilateral exchange rates.
A key driver behind this decline has been significant capital outflows. Foreign investors have sold approximately R34.1 billion in South African bonds, accelerating the currency’s slide. As a result, the rand now ranks near the bottom of emerging-market currencies tracked by Bloomberg.
Traditionally sensitive to global risk sentiment, the rand has been caught in a “risk-off” environment, where investors retreat from higher-risk markets. This has pushed South Africa back into a category of riskier emerging economies, reversing earlier positive sentiment.
Compounding concerns are rising oil prices. Brent crude oil is currently trading near $95 per barrel, significantly higher than pre-conflict levels. Elevated fuel costs are expected to filter through to inflation, with increases in petrol and diesel prices anticipated in the coming months.
Bishop warned that inflationary pressures could intensify, particularly if the conflict persists. Inflation is projected to average around 4% in the second quarter, potentially influencing monetary policy decisions by the South African Reserve Bank.
Markets are now pricing in a possible 25 basis point interest rate hike at the upcoming Monetary Policy Committee meeting in May, as policymakers attempt to contain inflation and stabilise the currency.