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Corporate and Investment Bank
Standard Bank Group
South Africa FX 01 April 2026

FX Monthly Chart Book

Shireen Darmalingam

  • Developments in the Iran war were central to the rand's weakness in March 2026, primarily through their impact on global risk sentiment, US dollar strength and energy markets. The escalation of hostilities, including disruptions to shipping through the Strait of Hormuz, triggered a pronounced risk-off response in global markets, prompting investors to shift capital away from emerging-market assets and into US dollar safe havens.
  • The rand reversed its early-year gains as global risk appetite deteriorated. The currency weakened from around R15.93/$ at the end of February and ended March at R17.00/$ on the back of increased uncertainty around the war. Over the month, the rand was 6,3% weaker against the dollar, 4.1% weaker against the euro and 4,4% stronger than the pound. It traded in a range of R15.97/$ - R17.23/$ in March. Most EM currencies weakened against the USD in March.
  • The primary driver of the rand's weakness, consistent with broader emerging market trends, was the sharp rise in global risk aversion following the escalation of the Iran war. The outbreak of hostilities around five weeks earlier initiated a flight to safety, a move amplified by surging oil and gas prices. While SA's inflation rate remained contained at 3.0% in February, in line with the SARB's target, suggested that it was not yet a domestic pressure point for the currency. However, markets quickly repriced the inflation outlook as oil prices rose sharply. As a net oil importer, SA is particularly exposed and vulnerable to higher crude prices, which reached a high of $117/bbl at the end of March. This higher oil price directly raised fuel costs, worsened the terms of trade and heightened inflation risks. This left the rand especially sensitive to the global supply-shock narrative dominating markets.
  • The South African Reserve Bank's (SARB's) decision to keep the repo rate unchanged at 6.75% last week reinforced perceptions that policymakers prioritised caution over explicit currency support in the face of a global supply shock. While this stance was consistent with the view that the inflation shock was externally driven, it nonetheless limited interest rate support for the rand despite inflation being at target.
  • Overall, the rand's performance in March was shaped far more by external geopolitical developments and broad USD strength than by domestic fundamentals, leaving the currency vulnerable to continued volatility as long as global uncertainty remains elevated. The rand might remain on the back foot though given the pressure on the terms of trade and concern about both the resilience of precious metals prices after their recent dip; the trajectory of the rand will depend to a large extent on the duration and intensity of the war. We see the rand averaging R16.51/$, R19.44/€ and R22.26/£ in 2026. The rand is expected to end this year at R16.60/$, and R16.85/$ in 2027. 
 

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