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The South African rand traded cautiously in early dealings on Wednesday, weighed down by renewed strength in the U.S. dollar and a sharp slowdown in domestic business activity, with December’s Purchasing Managers’ Index (PMI) recording its steepest contraction since January 2025.
By 0646 GMT, the rand was quoted at 16.38 to the dollar, reflecting a loss of roughly 0.2% compared with its close on Tuesday.
Data showed that the S&P PMI slipped to 47.7 in December from 49.0 in November, signalling weaker demand as companies scaled back purchases and drew down inventories.
In a research note, ETM Analytics said that although the latest figures point to near-term pressure, overall business sentiment has remained relatively firm. The firm noted that confidence for 2026 is being underpinned by expectations of new investment projects, improved sales prospects and a gradually strengthening economy.
“For now, the USD-ZAR is consolidating its recent retreat. Sentiment towards SA continues to run high, with the JSE rising to fresh record levels, and bond yields remaining subdued,” ETM Analytics said.
“The current market dynamics are supportive of the ZAR, which should ensure that the ZAR remains strong for some time to come,” it added.
The rand closed 2025 almost 13% stronger against the U.S. dollar, marking its largest annual advance in 16 years amid broad-based weakness in the greenback.
Meanwhile, South Africa’s benchmark 2035 government bond strengthened in early trading, with yields slipping by 5 basis points to 8.215%.
