Rand PMI Pressure: Currency Softens as Dollar Recovers and Local Activity Slows

The South African currency opened Wednesday on a softer note. The ZAR PMI squeeze reflected a stronger US dollar and weaker local data. Early trading showed the rand near 16.38 per dollar. That level marked a mild dip from Tuesday’s close. However, markets stayed calm despite the pressure. Traders focused on broader trends rather than short moves.

Business Activity Shows Clear Slowdown

December survey data pointed to easing momentum. The S&P PMI slipped to 47.7 from 49.0 in November. That reading showed contracting activity across sectors. Demand softened, while firms cut purchases and inventories. As a result, the index posted its sharpest drop since early 2025. Still, analysts urged caution when reading short term data.

Confidence Holds Despite Softer Numbers

ETM Analytics highlighted a more balanced picture. Business confidence remained steady despite the downturn. Many firms expect new projects in the coming years. Stronger sales and an improving economy also support optimism.
Meanwhile, market sentiment toward South Africa stayed positive. Equities reached fresh highs, and bond yields remained contained. Therefore, analysts believe the currency has underlying support. This backdrop could limit further weakness in coming sessions.

Bonds and Long Term View Remain Supportive

South Africa’s 2035 government bond strengthened early. The yield eased to around 8.215 percent. Lower yields often signal steady investor demand. That trend supports financial stability in the near term. Looking back, the rand closed in 2025 nearly 13 percent stronger. It marked the best annual gain in over a decade.
That performance followed a broad pullback in the US dollar. In addition, steady reforms helped improve investor trust. Overall, the ZAR PMI squeeze reflects short term pressure, not panic. For now, markets remain focused on longer term growth signals.