Key Takeaways

  • The South African rand is currently one of the strongest currencies in the world.
  • Driving ZAR higher is a combination of “reflation trades, ”carry trades,” and bullish commodity plays.
  • Top two trading partners, China and the US, are expanding infrastructure spending, increasing demand for raw materials from resource-rich South Africa.


Spot (mid-market) rate = ZAR 14.42 / $ (2:45pm, April 14, 2021) 1


As the US dollar continues its mixed performance against emerging market currencies this year, the South African rand has become the top performing EM currency in the world, despite being one of the most volatile.

Emerging Market* Currency Performances (%) vs USD YTD

*Israel, Taiwan and South Korea are no longer classified by the IMF as Emerging or Developing Market countries, they are now classified as Developed Markets.2 They are included here for comparison purposes.

Several themes are driving the value of the ZAR higher:

A trifecta of bullish factors is driving strong demand for the ZAR:

  1. The “reflation trade” narrative. All foreign currencies have benefited from this global investment narrative, dominant since early November when US political and virus vaccination risks were effectively eliminated.

  2. High local interest rates. Relatively high deposit rates in South Africa (1M 5.75%) have provided top returns for the “carry trade” strategy, hugely popular among individual investors, traders and hedge funds. The long (lend) ZAR / short (borrow) EUR trade earned top honors with a 5.75% return in Q1.3

  3. Rising commodity prices. Resource-rich South Africa has benefited from the strong uptrend in commodity prices that began in earnest April 2020 and accelerated with President Biden’s recent infrastructure spending plan.

Equity traders look past South Africa’s slow vaccine rollout. South Africa has one of the slowest vaccine rollouts in the world – less than 1 person per 100,000 have been vaccinated.4 Balancing that, investors see a bright future for the country’s economy – South Africa’s TOP40 stock index is up 15% YTD, well above the S&P 500 (+%10), Euro Stoxx 50 (+12%) and China’s Shanghai Composite (-2%). 5 Caution remains, however, as Moody’s may downgrade its already below investment grade BB- rating for SA sovereign debt next month. 6

China and US are South Africa’s top two trading partners. South Africa benefits from having two of the largest economies in the world as trading partners. Both China and the US are planning extensive infrastructure programs, requiring massive amounts of natural resources and iron ore, steel, platinum, diamonds, and gold are SA’s top export products.7 The South African rand is considered a so-called “commodity currency,” as it typically correlates highly with raw material prices.

The technicals: The USD/ZAR is trading around key support at 14.50 for the third time this year. In January and February, it traded at or slightly below that level, but both times it bounced hard, soaring up to 15.50, before heading lower. The currency pair is currently trading at 14.42, slightly below 14.50, its lowest level since January 2020. The next key support area is 13.80-14.00. 8

Final comments:

Positions in the ZAR may be stretched, particularly as the USD/ZAR trades around the key 14.5 level. Nevertheless, in anticipation of a global recovery and attendant development in US and China, both real and speculative demand for the ZAR is expected to remain strong. Despite vaccination issues in South Africa which could slow economic growth this year, global investors/speculators like what they see in South Africa. The country is an important destination for “reflation trades”, “carry trades” and commodity plays, outweighing any perceived political instability.

If you’d like to discuss your specific situation or for more analysis on FX markets or information regarding SVB's FX services, contact your SVB FX Advisor or the SVB FX Advisory Team at​

Scott Petruska, CFA Headshot
Written by
Scott Petruska, CFA
FX Market Insights

Insights into foreign exchange markets, strategies, and the global events that impact your cross-border transactions.
More on this topic

Editor's Top Picks
Read this next

FX Monthly Outlook: USD weakens as worldwide economies recover

Insights into foreign exchange markets, strategies, and the global events that impact your cross-border transactions.
Read more

Foreign Exchange Risk Services

Need help with managing currency risk and volatility? Help your business gain a competitive edge with SVB Foreign Exchange (FX) risk services and advisory. Learn more

1,3,5,8 Bloomberg 

2 “Taiwan, South Korea, and Israel: Developed or Emerging Market?”. ETF Database. November 30, 2009. 

4 “Coronavirus: South African rolls out vaccination program.” April 12, 2021. 

6 “Moody’s sends downgrade warning to South Africa.” BusinessTech. February 10, 2021. 

7 “South Africa Precious Metals and Minerals Mining Market Report 2020.” Businesswire. March 8, 2021. 

This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.

Foreign exchange transactions can be highly risky, and losses may occur in short periods of time if there is an adverse movement of exchange rates. Exchange rates can be highly volatile and are impacted by numerous economic, political and social factors, as well as supply and demand and governmental intervention, control and adjustments. Investments in financial instruments carry significant risk, including the possible loss of the principal amount invested. Before entering any foreign exchange transaction, you should obtain advice from your own tax, financial, legal and other advisors, and only make investment decisions on the basis of your own objectives, experience and resources.

Opinions expressed are our opinions as of the date of this content only. The material is based upon information which we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. The views expressed are solely those of the author and do not necessarily reflect the views of SVB Financial Group, Silicon Valley Bank, or any of its affiliates.

Subscribe to receive the Daily FX Update in your inbox.

By providing your email address and clicking on the Subscribe button below, you consent to receive emails from Silicon Valley Bank for your chosen categories. You also consent to the terms of our Privacy Notice. If you have privacy questions, you may contact us at You can withdraw your consent at any time.

Insights from SVB Industry Experts

SVB experts provide our customers with industry insights, proprietary research and insightful content. Check out these related articles that may be of interest to you.

How 2020 accelerated currency trends and what’s ahead




Webcast: Grow global with SVB