Key Moments
- Bank of America says the South African rand could appreciate through 2026. The outlook mirrors its strong rally in 2002–2003.
- The bank highlights a long-standing real-term link between ZAR and AUD. A 0.84 correlation in PPP gaps versus the USD suggests the rand is undervalued.
- BofA expects USDZAR to reach 16.50 by end-2026. It adds that a partial closing of today’s gap could take the pair toward 13.75.
Bank of America Sees Rand Set Up for a Multi-Year Recovery
Investing.com – Bank of America (BofA) believes the South African rand (ZAR) may be positioned for notable gains through 2026. The bank compares current conditions to the period in 2002–2003, when the rand staged a sharp rebound.
According to the report, long-term trends in the currency now resemble that earlier cycle. As a result, strategists argue that the setup for appreciation is strengthening.
ZAR-AUD Relationship Signals Potential Undervaluation
The analysis stresses the tight historical link between the rand and the Australian dollar (AUD) in real terms. BofA notes that the currencies show a 0.84 correlation in PPP gaps against the U.S. dollar.
This relationship helped signal the rand’s advance in 2002–2003. Today, it again points toward potential upside, especially as commodity prices rise. However, the rand has diverged from the Australian dollar, creating a wide disconnect.
BofA attributes this gap to years of weak investor confidence in South Africa. Still, it argues that several fundamentals have improved. The bank’s forecast for AUDUSD at 0.68 by end-2026, therefore, supports its positive view on the rand.
Forecasts for USD/ZAR and Scope for Additional Upside
Tatonga Rusike, BofA’s Chief Economist for Sub-Saharan Africa, says that “South Africa is in a good space.” His comments reinforce the bank’s constructive stance.
Meanwhile, Mikhail Liluashvili, BofA’s EEMEA FI & FX Strategist, projects USDZAR at 16.50 by end-2026. The report outlines an even stronger scenario if the valuation gap between ZAR and AUD narrows.
| Projection / Scenario | Level | Timing / Context |
|---|---|---|
| AUDUSD forecast | 0.68 | By end-2026 |
| Base case USDZAR | 16.50 | By end-2026 |
| USDZAR if current gap closes halfway | 13.75 | Implied by BofA valuation analysis |
If half of the deviation between the rand and the Australian dollar closes, USDZAR could fall to 13.75. This would signal even more upside for the currency beyond the base case.
Risks: Politics and Commodities Remain Key Variables
Even with this optimistic outlook, BofA warns that several risks remain. Political uncertainty in 2027 could weigh on sentiment. In addition, a drop in commodity prices would pose a major threat.
South Africa also lost its investment-grade rating in 2017. Nevertheless, BofA argues that the current valuation gap appears too wide when compared with improving fundamentals.
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