The South African rand strengthened to around 16.3 per USD, its highest level since mid-April, supported by improved global risk appetite and firmer precious metals prices. Optimism over a potential US–Iran agreement weighed on the dollar, after President Trump indicated that a memorandum of understanding to end the conflict and reopen the Strait of Hormuz was largely in place, while emphasizing he would not “rush” a deal.
On the domestic front, attention is focused on the South African Reserve Bank’s Monetary Policy Committee meeting scheduled for May 28. Markets widely expect a 25 bps rate increase, though a split decision is possible. Some economists argue that additional tightening is warranted to curb potential second-round inflation effects after headline inflation accelerated to 4.0% in April from 3.1% previously. Others contend that monetary policy is already sufficiently restrictive, giving the SARB room to pause and assess whether the recent uptick in inflation proves temporary.
