The rand has started 2026 on a strong run, trading at R16.36 to the United States dollar. That is its best level since August 2022, after gaining 12.0% in 2025.

Bheki Mahlobo, the economics and policy editor at The Common Sense, said, “I expect that the rand will test the R16.00 level in 2026.”

The main reason the rand strengthened is that the dollar weakened. A dollar strength index fell by roughly 10.0% during 2025. Analysts expected some pullback because the dollar had been unusually strong for years, and it also jumped before President Donald Trump’s 2024 election win.

One aim of the Trump administration has been to push the dollar lower so American exports can compete more easily.

Mahlobo said, “The primary catalyst for my rand outlook remains broad-based dollar weakness. Despite this weakness, the dollar continues to trade above its 20-year moving average, signalling room for further depreciation. This view is supported by the prospect of the US Federal Reserve (Fed) continuing to cut interest rates into 2026, which has the effect of reducing demand for dollars.”

Since September 2024, the Fed has cut rates by 175 basis points. Over the same period, the South African Reserve Bank (SARB) has cut its rates by 150 basis points. That keeps South Africa’s rates higher than America’s by about three percentage points, which can attract investors to South African assets because the returns are better.

The Fed is also paying more attention to jobs, not just inflation. US inflation is currently 2.7%, and hiring slowed sharply in late 2025. From September to November 2025, the US added 67 000 net new jobs, compared with 545 000 in the same period of 2024. The unemployment rate rose to 4.6% in November, up from 4.4% in September. Markets now expect three more US rate cuts in the first half of 2026, which could weaken the dollar further and help the rand.

The Fed’s first policy meeting of 2026 is on 27 and 28 January.