UBS has updated its view on the South African rand, anticipating further strengthening against the U.S. dollar across 2026 as a result of what it describes as supportive global conditions and progress on domestic reforms.
According to the bank's latest currency note, the rand's appreciation continued into February. UBS attributes the move to elevated precious metal prices, market expectations for additional Federal Reserve rate cuts, resilient global growth, and a broad investor preference for strong-performing assets outside the United States.
The bank specifies targets for the USD/ZAR exchange rate across 2026. UBS places the pair near its first-quarter 2026 target of 16.0 and projects further spot strength for the rest of the year. For the second, third and fourth quarters of 2026 the institution has set identical forecasts of 15.8, reflecting its view that the global environment, the rand's attractive carry, and domestic reform progress will remain supportive.
UBS notes that the South African currency has shown resilience despite a backdrop of wider pressures on risk sentiment in recent months. The assessment highlights that the rand's gains have persisted in spite of various global market uncertainties.
That said, UBS cautions that the current elevated positioning in markets could amplify any setbacks. The bank outlines specific scenarios under which the rand could suffer a sustained weakening. These include a deterioration in the global growth outlook, a shift toward a more hawkish stance from the Federal Reserve, a deterioration in U.S.-South Africa relations, or stalled reform momentum within South Africa.
Investors and market participants should therefore weigh the bank's constructive baseline against the enumerated downside risks. The forecast and associated risks have implications for foreign exchange markets, commodity-linked sectors tied to precious metals, and broader global asset allocation decisions driven by investor demand beyond U.S. markets.
Context and implications
- The rand's outlook from UBS is positive under the bank's baseline but conditional on several external and domestic factors remaining favorable.
- Market participants are advised to monitor positioning and the specified risk scenarios, which could prompt a reversal if they materialize.