Webinar: Rates, Dollar Dynamics, and the Rand’s Carry Advantage

Speakers from TreasuryONE and ETM Analytics said global markets are digesting mixed signals on growth, inflation, and policy. The U.S. Federal Reserve acknowledges a “tricky” mix of firm inflation and softer jobs data, while the SARB held rates in line with expectations. The Bank of England also paused. Locally, analysts noted Rand strength has been driven less by domestic change and more by a softer U.S. dollar.

ETM highlighted that traditional recession signals—tightening global dollar liquidity and weak leading indicators—have not translated into a clear downturn. Stock indices remain elevated, supported by pandemic-era excess savings and rising investment in AI. Rapid AI adoption may be distorting labour metrics and productivity measures, complicating central-bank read-throughs on inflation and growth.

Despite policy rate cuts abroad, long-dated bond yields remain elevated due to fiscal pressures and heavy refinancing needs. ETM argued that major central banks may need to halt balance-sheet run-off and could ultimately revert to quantitative easing to regain control of term premia. The dollar remains overvalued on longer-term metrics, while central banks have been selling U.S. Treasuries and increasing gold reserves—factors supportive of gold and a gradual dollar decline.

Short-cycle indicators in South Africa have improved, but structural investment remains weak. High real yields and favourable terms of trade keep the Rand near the top of global carry rankings; ETM’s models place current levels in a “sweet spot” for importers to hedge forward. Main risks include a global equity correction, renewed volatility from U.S. policy or court outcomes on tariffs, and domestic political uncertainty. For now, Rand volatility is unusually low, and the currency remains range-bound pending clearer global and local policy signals.