Illustrated in the US dollar/ZAR exchange rate from January to October 2025
Condensed summary of a weakening and strengthening South African rand – January 2025 to October 12, 2025
As of noon, October 12, 2025, the USD/ZAR exchange rate was USD/ZAR 16.56, meaning one US dollar was worth R16.56. Put differently, one ZAR was worth $0.06.
At the beginning of 2025, the exchange rate between the two currencies was USD/ZAR 14.01, implying that one US dollar could buy R14.01, and with R14.01 you could buy $0.85.
Considering the numbers above (October 12), the ZAR has weakened by R2.55 against the dollar since January 1, 2025, a depreciation of 18.2%.
However, the South African rand has fluctuated considerably between January 1 and October 12, as indicated in the summary below.
| Date | 1 USD equals | Appreciation (Rand value) | Appreciation (%) | Depreciation (Rand value) | Depreciation (%) | Refer remark number |
|---|---|---|---|---|---|---|
| 1 January | R14.01 | 1 | ||||
| 31 January | R14.93 | R0.91 | 6.57% | |||
| 28 February | R15.66 | R0.73 | 4.89% | |||
| 31 March | R17.87 | R2.21 | 14.11% | |||
| 3 April | R19.05 | R1.18 | 6.60% | 2 | ||
| 10 April | R17.98 | R1.07 | 5.62% | |||
| 23 April | R19.07 | R1.09 | 6.06% | 3 | ||
| 30 April | R18.56 | R0.51 | 2.67% | 4 | ||
| 29 May | R17.56 | R1.00 | 5.39% | |||
| 10 June | R16.50 | R1.06 | 6.04% | |||
| 30 June | R17.36 | R0.86 | 5.21% | 5 | ||
| 27 July | R16.43 | R0.93 | 5.36% | |||
| 31 July | R17.08 | R0.65 | 3.96% | 6 | ||
| 10 August | R17.72 | R0.64 | 3.75% | |||
| 31 August | R16.95 | R0.77 | 4.35% | 7 | ||
| 17 September | R16.19 | R0.76 | 4.48% | |||
| 25 September | R17.14 | R0.95 | 5.87% | |||
| 30 September | R16.73 | R0.41 | 2.39% | 8 | ||
| 12 October | R16.56 | 9 |
Remarks
- Values are at the close of a trading day in South Africa.
- During trading, during early April, the ZAR traded at R19.35 at one stage, an all-time high.
- This was the weakest closing price yet, a depreciation of R5.06, or 36.12%, since the start of 2025.
- The ZAR weakened R0.69 (3.86%) from the end of March to the end of April.
- The rand strengthened R0.20 (1.14%) from the end of May to the end of June.
- The South African currency appreciated by R0.28, or 1.61%, during July.
- On August 31, the rand was R0.13 (0.76%) stronger than it was on July 31.
- The ZAR appreciated a further R0.22 (1.30%) during September. Since the all-time high closing price of R19.03 on April 24.
- As of noon, October 12. This was an appreciation of R2.51, or 13.16% since the lowest closing price yet of R19.07 on April 23.
The graph below also illustrates the South African rand’s fluctuations from 1 January to 12 October 2025.
Factors that cause the South African rand’s fluctuations
The South African rand is a free-floating currency, meaning its value is determined by supply and demand. Generally speaking, increased supply and lower demand cause the ZAR to depreciate, while increased demand and lower supply imply that the price of the rand will increase.
Similar to other free-floating currencies, the rand continuously fluctuate in relation to many factors, such as:
Exceptional occurrences, such as the Covid-19 pandemic and the lockdown
Initially, the Covid-19 pandemic and the ensuing lockdown had a massive impact on the value of the South African rand, as can be seen in its 14.11% depreciation against the US dollar at the end of March 2025.
However, the long-term effect was not as severe as initially expected and the ZAR has since recovered considerably from its weak exchange rate against the dollar in early April.
South African Reserve Bank (SARB) policies
One of the key factors that influence the value of a country’s currency is the monetary policy of its central bank.
As the central banking authority in the country, the SARB’s mission is ‘to achieve and maintain price stability in the interest of balanced and sustainable economic growth’. Furthermore, the Reserve Bank’s primary function is ‘to protect the value of South Africa’s currency.’
The South African Reserve Bank utilises the repurchase rate (repo rate) as the key instrument to implement its monetary policy. The repo rate is the interest rate at which the Reserve Bank is prepared to make credit available to the banks.
Typically, an increase in the repo rate increases the value of the South African currency. Consequently, investors buy the ZAR, aiming to gain higher yields. The increased demand reduces the supply of the currency, increasing the value of the rand.
Conversely, a lower interest rate is less attractive and profitable for foreign investors, compelling them to look for more favourable investment opportunities in other countries. A lower demand causes the value of the ZAR to fall.
The SARB has put drastic measures in place to limit the negative impact of Covid-19 and the lockdown on the South African rand, such as:
- Gradually reducing the repo rate by 300 basis points to 3.5%.
- Making additional liquidity available to the banking sector by ‘increasing the size and duration of repo facilities and by purchasing government bonds.’
Credit ratings of credit rating agencies
Moody’s was the last of the three major credit agencies to downgrade South Africa to a speculative investment grade on March 29, 2025. Fitch downgraded the country to a lower level of junk status on April 7, 2025.
The effect of these downgrades was clearly evident in the decline of the ZAR in April 2025.
The agencies mentioned concerns, among others, such as the country’s debt in relation to its GDP, the SOEs, and the government’s economic policies.
In order to strengthen the value of the rand over time, the government will have to come with workable plans to solve these issues.
Political unrest
Over the course of its history, South Africa has mostly been a country marred by political unrest. Looking back over the past fifty years, the following circumstances have stoked or are still stoking political unrest. To name but a few:
- methods to implement and upheld the apartheid system with all the accompanied strikes, demonstrations, riots, civil disobedience, and political protests,
- state capture,
- unbridled corruption,
- so-called cadre redeployments,
- land redistribution and land restitution,
- demands and strikes of trade unions.
It is generally acknowledged that a country with a high risk for political unrest, is less attractive to foreign investors who prefer to invest in countries with less risk for political turmoil. Political instability can have a dramatic negative effect on the value of a country’s currency, such as the ZAR.
Economic performance
There are various economic indicators that contribute to the South African rand’s value rising or declining. For example:
- Inflation rates
Typically, a country with a stable and low inflation rate has a rising currency value, while a country with rising inflation experiences a depreciating currency, usually, accompanied by higher interest rates.
- Interest rates
South Africa’s interest rate is an important factor contributing to the weakness or strength of the rand.
Simply put, interest rates are the amount it costs to borrow money. The influence of interest rates on the ZAR is discussed above under the title, South African Reserve Bank (SARB) policies.
- Economic growth and the gross domestic product (GDP)
The strength or weakness of the country’s economy can either boost or diminish the South African rand. The easiest way to gauge a country’s economic position is to take notice of its GDP.
GDP is a trusted barometer of the country’s economic health. Simply put, the GDP measures the production of goods and services of the country during a given period of time, such as a quarter or year. It is also referred to as the size of the economy.
A strong GDP growth rate will see an increasing demand for goods and services with more job opportunities. The economy of the country is considered vigorous and healthy, creating an appealing destination for investments and capital inflows. Therefore, the currency will likely rise in value. Vice versa, a low or declining GDP, signals a weakening economy with demand for products and services declining, causing the currency to depreciate.
Early September 2025, Stats SA announced that South Africa’s GDP plunged by a mammoth 51% in the second quarter of 2025, also referred to as the pandemic quarter. The plunge reflected the massive damage done by the Covid-19 lockdown and pushed the country deeper into a recession.
This was the fourth consecutive quarterly decline in the country’s GDP, the figures for the previous three quarters being: Q1/20 – minus 2%, Q4/19 – minus 1.4%, Q3/19 – minus 0.6%. Typically, a recession is defined as two consecutive quarters of negative GDP growth.
Central banks, credit rating agencies, banks, and other financial institutions publish from time to time economic growth outlooks for South Africa. These outlooks are estimates of what the institutions expect the future GDP of the country will be.
Normally, if the growth outlook is reduced, the rand’s value will decline, while an improvement in the outlook will cause the ZAR to appreciate.
Economic growth outlooks by some of the financial institutions:
- The South African Reserve Bank adjusted in September 2025 its outlook for South Africa’s economic growth from -7.3% to -8.2%.
- The credit rating agencies’ outlooks for 2025 are currently as follows:
- Fitch (June 2025): -5.5%.
- Moody’s (April 2025): -6.5%.
- Standard & Poor’s (July 2025): -6.9%.
Unemployment rate
The official unemployment rate refers to the percentage of the country’s labour force that is unemployed and is actively seeking employment. South Africa’s official unemployment rate was 23.3% in Q2/20, down from 30.1% in the previous quarter. However, the figure is somewhat misleading, because fewer people were actively looking for employment during the strict lockdown period.
The real unemployment rate is a broader definition of unemployment, including people who have given up looking for employment, referred to as ‘discouraged work seekers.’ The real unemployment rate for the country was 42% in Q2/20, up from 39.7% in the first quarter of 2025.
A high unemployment rate could be interpreted by investors as a sign of a weak economy and an increase in the unemployment rate could be a signal that the country’s economy is continuing to weaken. This could cause investors to seek more favourable opportunities in countries with stronger growing economies, and so the ZAR may depreciate.
Conversely, a low unemployment rate may cause investors to believe that it is an indication of a strong and growing economy, providing profitable investment opportunities, causing an increase in the value of the country’s currency.
Trade balance
The trade balance of a country reflects the value of its exports minus the value of its imports.
A trade deficit is when imports exceed exports, indicating a negative trade balance. Contrarily, a trade surplus occurs when a country’s exports surpass imports, signifying a positive trade balance.
A country’s trade balance has an effect on the value of its currency. A nation’s trade deficit implies there is relatively less demand for its products, and hence, for its currency. The law of supply and demand dictates that when demand is low, prices should decline. In the case of a currency, it loses value.
Conversely, a trade surplus indicates there is a high demand for the goods of a country, and therefore, for its currency. According to the economics of supply and demand, prices rise, and the currency increase in value.
South Africa’s trade surplus increased to R38.9 billion in August 2025 from R37.2 billion in July 2025. The country’s trade surplus of R20.7 billion in Q1/20 dramatically plunged to a massive trade deficit of R91.5 billion in Q2/20, mainly due to the Covid-19 lockdown.
The ZAR is an emerging market currency
Emerging market currencies are susceptible to increased volatility and dramatic fluctuation in their exchange rates.
As an emerging market currency, the ZAR is also susceptible to factors such as:
- Global debt markets
When a pandemic such as Covid-19 affects the global debt market, reducing the availability of capital to invest in emerging countries, economic growth is likely to slow and the currency’s value depreciates.
- Monetary policies of developed countries
Typically, the monetary policy of a country such as the USA has consequences for the ZAR. For instance, if the Federal Reserve of the USA changes its interest rate, the South African currency is likely to experience short-term volatility.
Other examples of US policies that influence the ZAR’s performance is the trade war with China and the politicising of a second Covid-19 stimulus package.
Is the South African currency undervalued?
Is the South African rand currently undervalued? The answer is undoubtedly yes.
In an article in June 2025 on Refinitiv’s website, Ron Leven (professor of Economics at Duke University) mentioned that the impact of Covid-19 has been severe on emerging markets (EM). He concluded, saying: ‘Evidence shows that several of the weakest EM currencies – BRL, ZAR, TRY and MXN – are now significantly undervalued in real terms.’
In April 2025, an analyst of Goldman Sachs suggested that the ZAR might be ‘severely’ undervalued following its significant depreciation in 2025.
The Big Mac Index
The publication, The Economist, started in 1986 to estimate the value of currencies based on the price of a Big Mac burger in McDonald’s fast-food restaurants in various countries. Simply put, the Big Mac Index is used to determine whether a currency is undervalued, or too expensive.
The Big Mac Index is based on the economic theory of purchasing power parity (PPP). A principle of PPP is that over time currencies ought to adjust so that an identical product must cost the same in different countries.
The Big Mac Index converts the price of a Big Mac in a specific country to a US dollar value.
The Economist published its latest Big Mac Index in July 2025, indicating that the South African rand is 67.4% undervalued against the US dollar.
How was the number of 67.4% calculated?
- The cost of a Big Mac is around R31 in South Africa and $5.71 in the USA, which translates into a PPP rate of US$1 = R5.43 (R31/$5.71). Put differently the ‘implied exchange rate’ is R5.43/$.
- The actual rate at the time the index was measured was R16.67 to a US dollar, a difference of R11.24 (R16.67 – R5.43).
- The difference in percentage between R16.67 and R5.43 = 67.4% (R11.24/R16.67 x 100).
This made the South African currency the ‘world’s most undervalued currency.’
Assuming that all the variables remain the same and taking the exchange rate of USD/ZAR 16.56, as mentioned at the beginning of this article, the ZAR is 67.21% undervalued against the dollar.
