USD / ZAR (US Dollar / South African Rand)

The USD/ZAR is an exotic currency pair, less frequently traded compared to major pairs, but increasingly attracting traders’ interest. International money transfers are becoming increasingly popular for individuals and businesses conducting transactions across borders.

Traders may employ the USD/ZAR forex pair as a hedge against their currency exposure when making an asset purchase or receiving funds in USD. This strategy allows them to fix the prevailing exchange rate, mitigating the risk of currency fluctuations.

What is USD/ZAR?

The USD/ZAR pair is the exchange rate between the United States dollar (USD) and the South African rand (ZAR). In this pairing, the USD serves as the base currency, while the ZAR is the quote currency. Essentially, if the USD/ZAR exchange rate stands at 18.72, it implies that 18.72 South African rands are required to buy one US dollar.

The South African rand’s origins trace back to 1961. This is when it replaced the South African pound, coinciding with South Africa’s transition to a republic and severance of ties with the British Commonwealth. Since its inception, the South African rand has undergone several transformations and redenominations. Renowned for its volatility in the forex market, it often attracts traders seeking speculative opportunities.

Referred to as the “Greenback,” the US dollar holds the status of the world’s primary reserve currency, widely held by central banks and financial institutions globally. Additionally, it functions as a legal tender in several nations, including Ecuador, El Salvador, the Marshall Islands, Micronesia, Palau, Timor-Leste, and Zimbabwe. The dollar’s pervasive presence in international trade profoundly influences exchange rates and economic policies worldwide. It often serves as a benchmark for countries that opt to peg or link their currencies to their value.

Numerous countries and central banks maintain substantial reserves of US dollars as part of their foreign exchange reserves. These reserves are frequently utilized to stabilize their own currencies or facilitate international trade transactions.

What affects the price of the USD/ZAR pair?

The US dollar and the South African rand are affected by economic events and reports that measure various aspects of their countries’ economic health. These include interest rate decisions, unemployment rates, Gross Domestic Product (GDP) growth, inflation, and others.

Negative outcomes can cause a decrease in the value of either currency, while positive outcomes can result in an increase.

The actions and monetary policy statements issued by the South African Reserve Bank (SARB) and the US Federal Reserve can exert influence on the exchange rate of the USD/ZAR pair. Changes in monetary policy, such as adjustments to interest rates and implementation of quantitative easing programs, can directly impact the exchange rate.

South Africa plays a significant role as a producer of commodities like gold, platinum, and coal. Given this, fluctuations in commodity prices can profoundly affect the country’s trade balance and consequently impact the value of the South African rand (ZAR). For instance, a rise in commodity prices may bolster South Africa’s exports, leading to a strengthening of the ZAR.

Various economic indicators also play a crucial role in shaping the exchange rate. These indicators encompass inflation rates, unemployment figures, and GDP growth. A higher inflation rate can potentially diminish the value of the ZAR by reducing its purchasing power. Similarly, elevated unemployment rates and sluggish GDP growth can signal a weaker economy. This causes a downward pressure on the exchange rate.

What to watch out for when trading USD/ZAR?

  • The USD/ZAR currency pair has lower liquidity compared to currencies of advanced countries such as the United States, Switzerland, the United Kingdom, and others. As a result, this pair carries higher trading costs on a wider scale. On the other hand, it also offers higher volatility, which can translate into higher returns if traded correctly.


    Despite being an emerging market, Africa is more developed than many of its peers. Therefore, the rand and its high volatility are sufficient for trading online.

    Traders focusing on USD/ZAR should remain attentive to updates from significant institutions in both nations. These encompass:


    • Interest rate decisions and monetary policy announcements from the South African Reserve Bank (SARB) and the US Federal Reserve.
    • Trade balance data from both the United States and South Africa.
    • Reports on unemployment rates in the US and South Africa.
    • Consumer Price Index (CPI) releases from both countries.
    • Gross Domestic Product (GDP) figures for the US and South Africa.

    Keeping track of announcements and data releases from these key organizations is crucial for traders navigating the USD/ZAR pair.

How can you trade the United States Dollar against the South African Rand (USD/ZAR)?

Traders can trade with their banks or other financial institutions, which are considered safer methods in the market. However, the downside is that this approach often tends to be slow, and the return on investment is also small.

Derivative products such as futures contracts and options contracts are utilized. This allows traders to trade an asset without committing to owning it or paying its full market price when trading. However, using leverage also increases exposure to risks, and if the trade conflicts with the trader’s position, their entire investment capital may be at risk.

The better option is to open a real trading account with a broker licensed by the FSCA and awarded accolades.

How to Convert USD to ZAR

Calculating a conversion from dollars to rand is relatively straightforward. One method is to utilize a currency calculator, either online or through a mobile app. A currency converter is commonly preferred as it ensures accuracy, especially considering that exchange rates fluctuate regularly.

It’s important to note that currency conversion often incurs additional fees that may not be factored into the calculation provided by the calculator. For example, credit card companies and ATM networks typically impose a 1% conversion fee on foreign currencies. Additionally, merchants may charge supplementary fees if you request currency conversion at the point of sale.

 

For example:

  • 108 dollars in rands is 2,047.23
  • 158 dollars in rands is 2,995.02
  • 94 dollars in rands is 1,781.85

The rate is 1 rand to dollar is 0.053.

Currency Charts

You can also view currency charts to observe the current level and historical data of your USD/ZAR currency pair over recent days, weeks, months, and years. This way you can analyze trends and then compare and track exchange rates to identify the best rates for your international money transfers.

HOW CAN YOU TRADE THE USD/ZAR?

Traders have the option of trading with their banks or other financial institutions, as it is considered as one of the safest methods on the market. The downside is that this method is often slow and the return on investment is equally small.

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Derivative products such as futures and options are leveraged, so traders can enjoy trading on an asset without the commitment of owning it or paying its full market price when trading it. However, the use of leverage also increases exposure to risk and if a trade goes against the trader’s position, his or her invested capital could be wiped out entirely.

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The best option is to open a live trading account with an FSCA, award-winning broker such as CMTrading. Join us today and learn how to seize lucrative trading opportunities on the financial markets every day.

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WHAT FACTORS INFLUENCE THE USD/ZAR?

The United States dollar and African rand are affected by economic events and reports that measure different aspect of their countries’ economic health such as interest rate decisions, unemployment rates, GDP growth, and inflation among others.

A negative result may cause the value of either currency to drop, whereas a positive one will cause it to rise.

WHAT TO CONSIDER WHEN TRADING THE USD/ZAR?

  • The USD/ZAR is considered an exotic currency pair due to the rand being an emerging market currency, which carries less liquidity in comparison to the currencies of developed countries like the United States, Switzerland, the United Kingdom, and others. As a result, this pair carries a wider spread ad higher cost to trade. On the other hand, it also offers higher volatility, which could translate into a higher reward if traded right.
  • Despite being an emerging market, Africa is more developed than a number of its peers, and so the rand and its higher volatility are more sufficient for trading online.

Did you know?

Ever heard the expression “dirty money”? While your first association might go to illegal activities, this phrase gets a whole new meaning in this context. About 94% of all bank notes are contaminated with bacteria and 7% have dangerous pathogens on them.