FX.co ★ South African Rand at 3-Month High

The South African rand strengthened to around 16.2 per USD, its highest level since early March, supported by rising prices of key precious metals, particularly PGMs and gold. As major South African exports, these metals increase foreign-currency inflows when prices climb, while also helping to moderate imported inflation over time.

Nonetheless, the inflation outlook remains uncertain, with geopolitical tensions continuing to weigh on global energy prices. At its May 28 meeting, the South African Reserve Bank (SARB) cautioned that additional interest rate hikes may be required if inflationary pressures intensify. The Bank raised the repo rate by 25 basis points to 7%, its first increase since May 2023, citing mounting risks from the protracted Middle East conflict, higher fuel and food costs, and the possibility of second-round inflation effects. Market expectations are now growing that another rate hike could follow in July if the Middle East conflict persists and carries into the second half of the year.