In the post-crisis poker game that is forex trading, the rand has been a reliable blind, halving in value against the US dollar over the last six or seven years.

But with the greenback’s slide in Q1, South Africa’s currency has been enjoying something of a resurgence.

From a January low that saw USDZAR flirt with the 17 handle, the rand has rallied by roughly 10%, leading the emerging market currency charge as the US dollar fades.

Dovish squawks from the Federal Reserve have clearly aided the rand’s rise relative to the greenback, which has seen it touch 4-month highs versus the dollar to trade at 15 rand as we head into Q2.

Domestically, however, there is a mixed bag of factors weighing on the currency.

Zuma survives, just

Parliament has voted not to impeach Jacob Zuma, with the African National Congress blocking an opposition motion that alleged “serious misconduct”.

Nevertheless, there are clear concerns about the politics of South Africa – something that even the South Africa Reserve Bank (SARB) noted in a recent update when it talked of “abrupt moves” in financial markets.

The rand went into freefall last December when Zuma sacked two finance ministers in under a week, raising doubts about the government’s grip on the economy. The removal of Nhlanhla Nene from his position rocked already weak confidence and saw foreign portfolio flows into the country turn negative in the fourth quarter.

Economic clouds

Private sector economic activity slumped to a 20-month low last month, according to the Standard Bank South Africa PMI.

Output and new orders declined at a faster pace than previously and the employment level dropped at a record rate, signalling “deepening recession”.

Hot off the heels of this downbeat report, Standard & Poor’s has issued an even more pessimistic assessment of the country’s economic outlook.

The ratings agency cut its growth forecast for the year from 1.6% to 0.8%, citing the weak commodities sector – platinum prices fell 12% in the fourth quarter – and the political turmoil that has dented investment flows.

SARB warning

The rand has also come under some pressure after the South Africa Reserve Bank warned of heightened risks of sovereign credit downgrades that would hit the currency.

The central bank has raised the benchmark rate by 200 basis points since January 2014 as it seeks to counter a cocktail of weaker growth, rising consumer prices and a drought that has badly affected the agriculture sector.

According to the SARB, while in the past weak growth can be traced to “shocks, including strikes, electricity shortages and drought” the outlook now indicates “more diffuse sources of weakness”.

“Over the forecast period, growth is expected to be low despite a highly competitive exchange rate, significant public borrowing and a low real policy rate,” said the central bank in its April monetary policy review.

“Net exports face headwinds from declining commodity prices and slowing world trade growth. Government is entering a period of intensified fiscal consolidation. Households remain under pressure, burdened by debt and high levels of unemployment, among other factors. Businesses continue to see limited opportunities for expansion.”