Rand Is Undervalued Even After Year-Long Rally, Survey Shows

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(Bloomberg) — South Africa’s rand is undervalued at current levels, according to a survey of investors and economists, who see scope for further currency appreciation as the government’s reform program boosts economic growth. 

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On average, a Bloomberg survey of 14 respondents saw an exchange rate of 15.64 per dollar as fair value for the rand, with half of them seeing the currency as undervalued and three seeing it as close to fair value. Four said it was overvalued. Fair-value estimates ranged between 12.23 to 18 per dollar.

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The rand was trading at around 16.06 per dollar at 2:06 a.m. local time, paring a 2.6% selloff on Friday as prices of key South African exports gold and platinum clawed back some losses. The currency is up about 3% so far this year, adding to gains of nearly 14% in 2025. The survey was conducted between Jan. 26-30. 

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The findings of the Bloomberg poll broadly align with those of a Bank of America survey of fund managers conducted last month. BofA found respondents on average expected gains to extend to 15.60 per dollar over the next 12 months. 

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The South African Reserve Bank, meanwhile, is less bullish, seeing the currency weakening to 16.73 in the second quarter of 2026. It projects the exchange rate in a 16.54-17.10 range through end-2028.

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Optimism on the rand is underpinned by a mix of factors. While structural reforms and fiscal consolidation are helping contain inflation and borrowing costs, high metals prices and relatively low oil costs have sharply improved the country’s terms of trade. That’s luring more foreign investors to South African stocks and bonds.

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Frank Blackmore, an economist at KPMG in Johannesburg, sees the rand appreciating to 15.50 per dollar by year-end. Fiscal policy will be a big driver of the currency’s performance this year, according to him, with the national budget presentation on Feb. 25 expected to be a key test of authorities’ reform ambition.

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“While global factors such as the dollar and interest rates matter, any deviation from fiscal consolidation, particularly excessive growth in public debt, would have the most immediate impact on the exchange rate,” Blackmore said. 

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For now, nearly half the reforms under Operation Vulindlela — a unit set up by President Cyril Ramaphosa to address constraints such as energy and freight — are on track. Most of the remainder are advancing despite delays, the National Treasury said Friday. 

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The measures should lift growth to 1.6% this year and almost 2% in 2027, economists surveyed by Bloomberg expect. In contrast the economy expanded by less than 1% a year on average in the past decade.

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The rand could face headwinds, however, from any sudden commodity-price reversal or a stronger dollar. It was briefly hit at the end of last week and on Monday by a gold-price shakeout and many see its recent gains as stemming from the rally in precious metals. 

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Kim Silberman, a macro strategist at Matrix Fund Managers in Cape Town, estimates the rand’s fair value at 16.70 per dollar.

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“The rand is a high-beta, commodity-linked currency,” she said. “It has been more responsive than other emerging-market currencies to rising demand for emerging-market assets and the rally in commodity prices.”

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—With assistance from Mike Cohen.

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