Rand gains strength despite US trade tariffs as commodity prices surge

The rand continued to strengthen on Wednesday morning, supported by firmer gold prices and a weaker dollar, even as a 30% tariff on South African imports to the US is scheduled to come into effect at midnight US time.

As of noon on Thursday, the local currency was trading at R17.72, having continued its improved trajectory since a spike above R18 last Saturday. The JSE’s ALSI, too, has been doing well, having again breached 100,000 points to a new record.

According to Andre Cilliers, currency strategist at TreasuryONE, the dollar remains on the back foot against major currencies as expectations of interest rate cuts by the US Federal Reserve increase. Cilliers said dovish commentary from Fed Governors Daly and Kashkari, who both called for immediate cuts in response to weak labour market data, has shifted sentiment.

The growing prospect of US interest rate cuts is weakening the dollar, which supports the rand. Nolan Wapenaar, co-chief investment officer at Anchor Capital, said the financial market is now pricing in the possibility that the Fed could cut rates three times in 2025.

Recently, there were serious concerns that President Cyril Ramaphosa was setting South Africa's economy on fire, as trade tariffs would hit an economy already reeling and unable to grow and create jobs.

Wapenaar added that China’s exports unexpectedly rose by 7.2% in July compared to a year ago, which is helping emerging market currencies to trade with a positive bias. This has further supported the rand’s recovery, despite South Africa’s failure to negotiate an alternative trade arrangement to avoid the incoming US tariffs.

Gold prices have also gained, underpinned by safe-haven demand following tariff announcements and rate cut expectations. Cilliers said the combination of a weaker dollar and heightened tariff uncertainty is supporting the metal. Traders are now pricing in a 95% probability of a 25 basis point interest rate cut by the Fed next month.

Commodity movements have also played a key role in the local market’s performance. Peter Little, fund manager at Anchor Capital, said the ALSI is up 22% for the year-to-date, with performance concentrated in a few sectors that are largely unaffected by domestic economic conditions.

Little said precious metal miners, which make up around 15% of the ALSI by market capitalisation, have more than doubled in value this year and contributed about 60% of the index’s total performance. He noted that this was driven by strong rallies in gold and platinum prices, which are up 29% and 46% respectively for the year to date.

Naspers and Prosus, which also account for about 15% of the index, are up 35% for the year and have added another 25% to the ALSI’s performance. The gains were largely attributed to the performance of Tencent, the Chinese technology company in which they are invested, which has risen 38% so far this year.

Little said the telecommunications sector, though it makes up less than 5% of the ALSI, has gained 68% this year and contributed roughly 12% of the index’s return. Combined, these three segments – precious metal miners, Naspers/Prosus, and the telcos – represent around a third of the ALSI’s market cap but account for approximately 95% of its total gains in 2025.

In contrast, Little said companies whose earnings are primarily linked to the domestic economy have been flat overall this year. He noted that sectors focused on the South African consumer, such as discretionary retailers, are down 20% so far this year, reversing most of the gains seen after the formation of the government of national unity.

Oil prices rose by 1% on signs of steady demand in the US, although uncertainty around the impact of the newly announced tariffs limited further gains. Brent crude was trading at $67.32 per barrel, while West Texas Intermediate was at $64.80.

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