By: Bianca Botes, Executive Director at Peregrine Treasury Solutions

The rand has certainly been on a tumultuous ride in the 12 months since the 2020 State of the Nation Address (SONA). After trading below the R15/$ mark in February last year, the local unit quickly stepped off the cliff, weakening rapidly to bottom out at above the R19/$ mark in April as COVID-19 panic took hold of markets. 

However, after a fairly dramatic dive, the rand then spent the next 10 months clawing its way back to its starting position below R15/$ as we look forward to the 2021 SONA, coming full circle as global sentiment worked in the rand’s favour. With such dramatic movements, it is little wonder that traders have nicknamed the USD/ZAR pairing “the rattler”.

Examining the infographic, South Africa's lockdown restrictions appear visually to have influenced the rand's movements. But in reality, global factors such as stimulus, liquidity, risk-on sentiment and the hunt for yield have played a much larger role in the rand's strengthening over the past few months.

As local focus shifts to President Ramaphosa’s speech, we will be watching carefully for any insights into government’s economic policies, as well as how government intends to address the glaring issues at state-owned enterprises such as Eskom and SAA, which continue to weigh heavily on  the country’s already over-burdened balance sheet.

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