Strong rand not a sign of economic recovery – economist
Chief Economist at the Efficient Group, Dawie Roodt, has warned that the relative strength of the rand should not be seen as a sign of economic recovery.
The rand traded at R17.75 to the US dollar on Wednesday, the local currency’s strongest level against the greenback in more than a year.
Roodt said that while a strong rand is good news for inflation and interest rates, the current scenario is down to pressure on the US dollar, rather than South Africa’s economic prospects.
“The strong rand is not indicative of a very strong South African economy, although it will contribute to a better economic outlook. It is not because of a better economy,” said Roodt, adding that the chances of an economic upturn are slim.
The South African economy barely kept its head above water in the first quarter of 2025, expanding by a marginal 0,1% between January and March compared with the fourth quarter of 2024.
“So, look at this more as a case of the US dollar being under pressure than the strengthening of the rand,” said Roodt.
At the same time, Roodt believes there is a possibility that the rand could reach R17.50 to the dollar, which some feel could be a turning point for what is generally seen as an undervalued currency.
Meanwhile, US consumer inflation ticked up in May, in line with analyst expectations, government data showed Wednesday as President Donald Trump's sweeping tariffs began to ripple through the world's biggest economy.
The consumer price index (CPI) came in at 2.4 percent from a year ago, after a 2.3 percent reading in April, the Labor Department said, with headline figures cooled by energy prices.
All eyes were on the data after Trump imposed a blanket 10 percent levy on imports from almost all trading partners in early April.
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