Soft South African Inflation Data Paves Way for USD/ZAR Rally—Another Bad Week for the Rand?

South Africa’s tepid inflation numbers just handed forex traders a gift—and the rand another headache. With the USD/ZAR pair coiled near key levels, weak price pressures give the SARB less ammunition to defend the local currency.

Markets now price in delayed rate hikes—classic ’too little, too late’ from a central bank that’s always one step behind the curve. Meanwhile, dollar bulls circle like vultures over a wounded antelope.

Technical setup shows 19.50 as next resistance. Break that, and we’re staring down 20.00 before May ends. Another day, another emerging market currency taking the brunt of Fed policy.

Bonus jab: At this rate, the rand’s volatility makes Bitcoin look like a stablecoin—and we don’t mean that as a compliment.

Volatile April Keeps USD/ZAR on Edge

The USD/ZAR currency pair experienced intense volatility through April, surging close to the psychological 20.00 level during the first half of the month before retreating sharply. Despite the reversal, the pair remains about 0.50 points higher for the month, with key moving averages providing support and bullish momentum preparing to resume.

A Long-Term Uptrend Still Intact

Historically, the South African Rand was stronger than the US Dollar, trading below parity in the 1970s. However, by the early 1980s, USD/ZAR crossed above 1.00 and has maintained a broader uptrend ever since.
Throughout most of 2024, the Rand gained modest ground as the USD softened globally. Yet, a sharp rebound in the dollar in late 2024 reignited the uptrend in USD/ZAR, a move that continues into 2025.

Rand Remains the Weakest Among Major Currencies

Although the USD Index (DXY) has fallen significantly from 110 in January to a recent low of 97, recovering slightly to above 99, the Rand has not been able to capitalize on this weakness.
Unlike other BRICS currencies, which have gained against the dollar in 2025, the Rand continues to falter, making it arguably the weakest among the group.

One striking factor is that even the soaring price of gold—normally a supportive factor for South Africa’s currency—has failed to provide meaningful strength to the Rand.

Weak Inflation, Potential Rate Cuts Could Add Pressure

South Africa’s inflation data suggests a declining trend.

• Headline CPI dropped sharply, from 0.9% in February to 0.4% in March, translating to a YoY slowdown from 3.2% to 2.7%.
• Core CPI also eased, falling from 1.1% to 0.5% monthly and from 3.1% year-over-year.

This weakening inflation backdrop increases the likelihood of further interest rate cuts by the South African Reserve Bank (SARB). which would weaken the Rand further and send USD/ZAR to 20. After peaking at 8.50% last year, rates have already been trimmed to 7.50%, and more easing could be on the way, further eroding demand for the Rand.

Outlook: A Break Above 20 Looms

Given the South African Rand’s inability to stabilize even when the US Dollar is under pressure, a return of USD strength could quickly propel USD/ZAR above the critical 20.00 level. Import prices are becoming more burdensome for South African consumers, and with policy rates potentially dropping further, the Rand’s vulnerability could intensify. Unless there is a major shift in sentiment or policy, the path of least resistance for USD/ZAR remains upward.