South African Reserve Bank (Sarb) Governor Lesetja Kganyago heralded the fortitude of the rand and other emerging-market currencies amid the Iran war, and said this could reflect a wider souring on US assets.
“The broad resilience of emerging market currencies may well be due to weakening global trust in the US dollar and the need of investors to diversify portfolios,” he told an audience in the Eastern Cape on Monday evening.
“It is not that they are abandoning the dollar, but nowadays no one wants to be all-in on the dollar either.”
The rand, which had strengthened considerably before the conflict began on 28 February, has backed off to around the levels of late last year, even as oil-importing South Africa faces surging fuel prices.
“The rand exchange rate has been surprisingly resilient so far,” Kganyago said.
“It depreciated in March but then recovered to roughly pre-crisis levels. Many of our peers have had similar experiences.”
The JPMorgan Emerging Market Currency Index has recovered since late March and is now almost back to pre-war levels.
Investors have warmed to rand assets in recent months, reassured by growing confidence in the nation’s fiscal discipline, economic reforms and the central bank’s adoption of a 3% inflation target.
Analysts at Moody’s Ratings, in a note published Tuesday, also point more broadly to durable improvements in public finances to explain how some large emerging-market economies have been able to absorb external shocks.
Not that the dollar’s dominance is under threat.
International Monetary Fund data showed it accounting for around 57% of the world’s official foreign exchange reserves in the final quarter of 2025 versus under 2% for China’s yuan.
Still, Kganyago’s remarks touch on an undercurrent of criticism that US President Donald Trump’s actions since re-entering the White House will have lasting consequences for the dollar’s appeal.
These include his trade tariffs, attacks on traditional allies and Washington’s use of financial sanctions against adversaries, which his predecessors also deployed.
South Africa is a member of the Brics group of influential emerging-market nations who’ve previously discussed reducing their dependence on the greenback – a suggestion that drew a Trump threat of punitive tariffs if they failed to commit to the US currency.
BLOOMBERG
