The rand should be trading below R10.00 to the US dollar

Efficient Group chief economist Dawie Roodt said that the South African rand should be trading below R10.00 to the US dollar.

However, due to the risk premium associated with South Africa, it is much weaker than it should be.

He shared this information during a discussion with Truth Report, where he discussed the strength of the rand in recent weeks.

In April 2025, the rand traded at over R19.00 against the US dollar amid geopolitical risks and global economic concerns.

However, it has strengthened due to global monetary shifts, a strong commodity cycle, and better conditions in South Africa.

One of the biggest drivers was the new inflation target of 3%, which is lower than the previous 3% to 6% band.

Lower inflation creates a more stable price environment, which, in turn, makes the exchange rate more stable.

The lower currency volatility creates more certainty for investors, which has seen money flowing into South African bonds and equities.

Although the rand has strengthened from R19.00 to R16.00, it remains far below where it should be trading.

“We must understand that fundamentally, the rand remains a very weak currency despite these levels,” Roodt said.

“In fact, it should be trading at below R10.00 to the dollar, yet it currently sits around R16.00.”

This discrepancy in the exchange rate, he explained, is due to the risk premium associated with South Africa.

“This risk premium is caused by poor macroeconomic policies, weak economic growth, and relatively high inflation,” he said.

“To fix this, the South African government needs to implement the right policies and ensure inflation decreases.”

“If these measures are put in place, the rand could easily trade well below R16.00 or even R15.00 to the dollar. However, don’t hold your breath.”