The USD/ZAR is a popular currency pair that represents the value of the United States dollar (USD) relative to the South African Rand (ZAR). It is an intriguing pair for forex traders given South Africa’s role as an emerging market and commodity exporter. In this comprehensive guide, we’ll cover everything you need to know about trading USD/ZAR, from its history and economic ties, to technical analysis and actionable trading strategies.

A Brief History of USD/ZAR

The USD/ZAR currency pair has its origins in the early 1960s when South Africa left the sterling area and established the South African rand as its national currency. At this time, the rand was pegged to the US dollar at a rate of 1 USD = 0.7 ZAR.

This fixed exchange rate remained in place until the 1970s when mounting economic pressures led South Africa to break the peg and transition to a managed float. Over the next few decades, the rand was allowed to fluctuate within a managed band that was frequently adjusted in response to economic conditions.

In 1995, South Africa officially adopted a fully floating exchange rate, allowing market forces of supply and demand to determine the external value of the rand. This transition was prompted by the need for greater monetary policy independence as the country emerged from apartheid.

Since adopting a free float, the USD/ZAR pair has experienced bouts of extreme volatility as traders have responded to political uncertainty, changes in commodity prices, inflationary pressures, and risk sentiment toward emerging market currencies.

Some key events that have impacted the pair include:

  • The Asian Financial Crisis in 1997 that triggered a sharp depreciation in the rand
  • The early 2000s commodities boom that supported rand gains against the dollar
  • The Great Recession in 2008 which led to risk aversion and rand selling
  • Domestic political and economic uncertainty in the late 2010s fueling rand weakness

Understanding this historical context helps provide perspective on what drives exchange rate fluctuations between the US dollar and South African rand.

The Economic Relationship Between the US and South Africa

There are several important economic ties between the United States and South Africa that impact the USD/ZAR exchange rate:


The US is one of South Africa’s largest trading partners behind China and the European Union. Total trade between the two countries exceeds $11 billion annually. South Africa mainly exports precious metals, vehicles, machinery, and agricultural products to the US. Meanwhile, it imports machinery, aircraft, medical equipment, and vehicles from the US. Changes in trade flows based on global growth trends can impact supply and demand for the rand and dollar.


As a major exporter of gold, platinum, diamonds, and coal, South Africa depends heavily on commodity exports. The prices of these resources in global markets are primarily denominated in USD. When commodity prices rise, it increases demand for the dollar and tends to push USD/ZAR lower. Conversely, falling commodity prices often lead to rand depreciation.

Interest Rates

The South African Reserve Bank (SARB) manages interest rates and inflation targets in South Africa. When the Fed raises or lowers rates, the SARB often follows suit to prevent excessive capital outflows. Interest rate differentials between the US and South Africa can impact the carry trade appeal of the USD/ZAR pair.

Investment Flows

The US and other advanced economies account for a significant portion of foreign portfolio flows into South Africa’s equity and bond markets. Periods of global risk aversion will often spark an exodus from emerging market assets, causing the rand to weaken against safe haven currencies like the dollar.

Credit Ratings

South Africa has tended to receive lower credit ratings than the US based on governance concerns and its high percentage of foreign-denominated debt. Downgrades to South Africa’s credit rating can worsen risk sentiment toward the rand. Meanwhile US creditworthiness remains vital for dollar sentiment.

By analyzing these economic ties and data trends, traders can better understand the fundamental drivers impacting USD/ZAR price action.

Unique Attributes of Trading USD/ZAR

When trading USD/ZAR, it helps to recognize several unique attributes of this currency pair:

  • Volatility – The USD/ZAR is known for its extreme volatility due to South Africa’s role as an emerging market. The pair experiences periodic spikes in volatility around political unrest, commodity price swings, and shifts in risk appetite.
  • Wide spreads – The bid-ask spread on USD/ZAR is often wider than major pairs due to lower liquidity. This increases trading costs.
  • Risk reversals – USD/ZAR risk reversals tend to favor USD calls over ZAR calls, reflecting the market’s bias toward rand depreciation and dollar strength.
  • Correlations – USD/ZAR exhibits a strong negative correlation to precious metal prices and a positive correlation to the U.S. Dollar Index (DXY).
  • Technical levels – The 14.00 and 15.00 handles are key psychological levels on USD/ZAR based on previous swing highs and lows.

Being aware of these attributes allows traders to size positions appropriately, improve risk management, and identify opportune situations to trade around economic events or technical levels.

Trading USD/ZAR Around Macroeconomic News Events

The USD/ZAR exchange rate is sensitive to macroeconomic news announcements and data releases. Here are some tips for trading around high-impact events:

  • South African CPI data – This consumer inflation data directly impacts SARB interest rate policy. Higher than expected CPI typically leads to ZAR weakness on rate hike bets.
  • South African GDP figures – Stronger expansions in quarterly or annualized GDP growth encourage ZAR bulls while contractions lead to rand selling.
  • Fed monetary policy decisions – Dovish signals from the Fed weigh on the dollar while hawkishness boosts the greenback against the rand.
  • U.S. Non-Farm Payrolls – Robust job additions reinforce U.S. growth prospects and dollar demand, pressuring USD/ZAR lower.
  • Commodity price data – Rising gold, platinum, palladium, copper, and coal prices fuel ZAR buying in reaction to higher export revenues.
  • Credit rating reviews – Downgrades to South Africa’s credit rating by Moody’s, Fitch, or S&P depress the rand by worsening risk sentiment.

When trading the news, be cautious of volatile “knee jerk” reactions. Consider waiting for the dust to settle before establishing positions. Use stop-loss orders to contain downside risk around events.

Key Factors that Influence the USD/ZAR Exchange Rate

Many interconnected factors drive exchange rate fluctuations between the U.S. dollar and South African rand. Understanding these key drivers is essential for forecasting price action.

Monetary Policy Divergence Between the Fed and SARB

Interest rate differentials and shifts in monetary policy stance between the two central banks exerts significant influence over USD/ZAR. When the Fed adopts a hawkish tilt toward raising rates relative to the SARB’s dovishness, the interest rate spread widens in favor of USD, driving its strength against the rand.

Conversely, if the SARB tightens policy while the Fed eases or remains on hold, the yield advantage of holding rands increases, fueling ZAR gains against the USD. Forward guidance from both central banks also sways rate hike expectations and currency valuations.

Risk Appetite Fluctuations

Sentiment in financial markets constantly oscillates between greed and fear. During times of rising risk aversion, traders sell emerging market currencies like the rand in favor of safe haven assets like U.S. Treasuries and the dollar. This lifts USD/ZAR. On the flipside, optimism fuels capital flows into high-yielding currencies, weighing on the pair.

Factors that breed risk off sentiment and rand selling include:

  • Geopolitical tensions
  • Global growth downgrades
  • Equity market routs
  • Commodity price declines
  • Domestic political strife

Whereas improved risk appetite is characterized by:

  • Dovish central banks
  • Upbeat economic data
  • Stock market rallies
  • Higher commodity prices
  • Stable politics

Dollar Strength or Weakness

As the base currency, the dollar’s performance against major currencies like the euro and yen impacts its exchange rate against the rand. When factors like rising Treasury yields, upbeat U.S. data, or hawkish Fed policy boosts the greenback, the dollar outperforms the rand.

Conversely, dollar weakness driven by dovish Fed expectations, political gridlock, deteriorating U.S. data, or haven demand for the yen undermines the dollar against its South African counterpart. Monitoring the broader DXY index gives insight into prevailing dollar sentiment.

South Africa’s Economic Fundamentals

Perceived strength or weakness of South Africa’s economy also sways the rand’s attractiveness against the dollar. Signs of resilience or acceleration in growth metrics like GDP, industrial production, and PMI surveys support rand bulls. Meanwhile deteriorating fundamentals weigh on the currency.

Government corruption scandals, labor disputes, infrastructure bottlenecks, and socio-political tensions also introduce reform uncertainty that deters foreign investment and sinks the rand. Rising current account deficits due to falling commodity export revenues present an additional headwind for ZAR stability.

Technical Levels

In addition to fundamental drivers, technical indicators, chart patterns, and key levels help inform directional bias and potential support/resistance zones for USD/ZAR trading. These include:

  • 14.00 and 15.00 psychological handles
  • Historic swing highs and lows
  • 50, 100, and 200-day moving averages
  • Ascending/Descending trend channel support/resistance
  • Overbought/oversold RSI levels
  • Bullish/Bearish crossover signals like Golden Cross or Death Cross events

By blending technical and fundamental analysis, traders can improve timing of entries and exits in the pair.

Trading Strategies for USD/ZAR

Now let’s explore some actionable trading tactics and strategies for navigating moves in the USD/ZAR currency pair:

Range Trading

The USD/ZAR often oscillates between defined support and resistance levels that form reliable trading ranges. We can look to enter long positions near range lows and short positions at range highs while targeting mean reversion toward range midpoints. Stops are placed outside the defined range.

For example, if USD/ZAR is trading between 14.50 and 15.00, we’d look to go long near 14.50 with a target of 14.75 and stop under 14.45. If the pair hit 15.00, we’d enter short positions targeting 14.75 with a stop above 15.05. Use healthy risk/reward ratios within ranges.

Breakout Trading

When USD/ZAR breaks out of well-established trading ranges with high volume, it signals potential for a powerful directional move higher or lower. We can trade breakouts by entering long following upward range breaks or short after downward breaks.

Initial targets are set at the next historic resistance or support level. Move stops to breakeven once price exceeds the 20-30 pip range and trail further to lock in profits if the trend persists. Honor stops promptly if breakouts fail or reverse.

Carry Trades

When interest rate differentials favor the rand, we can exploit USD/ZAR’s negative carry by shorting it against a higher yielding currency like the Aussie or Loonie. This captures the yield advantage over time.exit carry trades if yield spreads compress or risk off events spur sudden ZAR weakness.


Exporters and importers with USD/ZAR exposure can hedge their currency risk by taking offsetting long or short positions in the pair. Natural hedges also exist given correlations between the rand and commodities. For example, a South African gold mining firm long gold futures could hedge by shorting USD/ZAR.

Trading the Crosses

Given USD/ZAR’s correlations to EUR/USD and USD/JPY, trading the crosses provides indirect signals on rand directionality against the dollar. If EUR and JPY weaken against the dollar, it indicates rand weakness is likely as well. Monitoring crosses expands trading opportunities.

By matching strategies to prevailing market conditions and trends, traders can find optimal spots to enter trades with clearly defined risk parameters. Maintain disciplined adherence to stop levels and target taking.

The Impact of USD/ZAR on the South African Economy

Fluctuations in the USD/ZAR exchange rate have profound implications for South Africa’s economy and markets. A weaker rand stimulates South Africa’s export sector by making exports cheaper and more competitive globally.

But currency depreciation also inflates the costs of imported goods and commodities like oil, causing inflationary pressures. This forces the South African Reserve Bank to tighten monetary policy, lifting borrowing costs for consumers and businesses.

Currency volatility also introduces uncertainty around business valuation and investment returns, which can hamper foreign direct investment flows. Extreme rand depreciation periods have disrupted South Africa’s capital markets.

A stronger rand provides benefits such as lower inflation and increased consumer purchasing power. But currency strength deters exports, hurts the mining and agricultural sectors, and dampens tourism.

Overall, exchange rate stability facilitates healthier long-run economic growth in South Africa. This underscores the importance of monitoring USD/ZAR given its broad impacts.

Trading USD/ZAR Around South African Politics

South Africa’s history of political unrest makes the rand vulnerable to heightened volatility around major events. Traders must stay abreast of the political landscape.


National elections see pronounced swings in USD/ZAR depending on whether results are viewed as rand-positive or negative. Concerns over populist policies and their economic fallout often sink the currency.

Leadership Change

Transfers of power between the ruling ANC party leaders or presidential impeachments/resignations usher in reform uncertainty. This fans risk aversion and rand selling pressure as new leaders establish their priorities.

Corruption Scandals

Scandals implicating Zuma, the Guptas and other government figures stained South Africa’s institutional strength. Ensuing outrage and volatility forced Zuma’s ouster in 2018, sending the rand sharply higher.

Social/Labor Unrest

Protests, demonstrations, and labor strikes disrupt economic activity. Violent clashes or heavy-handed police responses also erode South Africa’s stability, pressuring the rand lower.

By closely tracking political developments and gauging market reactions, traders can identify tradable volatility around major events while exercising proper risk management.

Managing Risk When Trading USD/ZAR

Given its penchant for volatility, trading USD/ZAR demands robust risk management:

  • Use stop-loss orders on all positions to contain losses from adverse moves
  • Trade small position sizes to avoid blow ups
  • Adjust take profit levels based on emerging volatility
  • Scale into trending moves to reduce cost basis
  • Let winners run but don’t be greedy taking profits
  • Avoid trading around illiquid periods like Asian trading hours
  • Keep most exposure intraday – minimizing overnight holds
  • Hedge rand exposure using correlated assets like gold or S&P 500
  • Stay informed on breaking news and macro developments

Avoid overleveraging into rand positions. Be cognizant of event risks. And weigh the carry benefits against the risks before pursuing carry trades. Volatility can quickly erase gains if not managed prudently.

Pros and Cons of Trading USD/ZAR

Below are some key advantages and disadvantages to keep in mind when trading the USD/ZAR currency pair:


  • High liquidity and narrower spreads during European/North American sessions
  • Extensive research coverage and analyst commentary on South Africa’s economy
  • Ability to capitalize on rising or falling volatility
  • Offers diversification away from trading just dollar-crosses
  • Strong directional trends around news events and risk appetite shifts


  • Prone to extreme volatility that requires tighter risk management
  • Political uncertainty and opaque policy direction introduces uncertainty
  • Challenging to trade around illiquid London/Asian trading hours
  • Carry trades have negative drift without active position management
  • Requires deep knowledge of South African economic dynamics

While trading USD/ZAR presents risks, its unique attributes provide traders an interesting market to apply strategies around economic events, risk sentiment shifts, and technical levels.

Final Thoughts on Trading USD/ZAR

The USD/ZAR currency pair provides great opportunities for traders who understand its unique attributes and drivers. Following monetary policy divergence between the Fed and SARB, tracking commodity price trends, monitoring risk appetite swings, and staying abreast of South African politics gives key insights into USD/ZAR directionality.

Combining fundamental and technical analysis allows traders to time entries during trending moves, ranges, and volatility spikes. Risk management is vital when trading the volatile pair. Hedging dollar or rand exposure is also prudent for South African businesses.

While challenges exist trading USD/ZAR, its rich fundamentals and tradable volatility around news events make it a compelling pair for forex traders to add to their watchlist. With the right knowledge and strategies, it can diversify trading opportunities beyond just dollar-crosses.