2024 was a volatile year for forex activity and currencies around the world. Geopolitics saw the impact of major conflicts, elections in South Africa, the UK and the US, as well as a growing sense of self-reliance from the BRICS nations, all of which affected the global currency markets.

Where do foreign currencies stand after 2024?

The year saw a peak followed by a downward trend in inflation globally. We could see this with central banks globally initiating an interest rate-cutting cycle as monetary policy loosened after the rampant inflation we saw after the COVID-19 pandemic.

Meanwhile, European interest rates diverged from the US thanks to differences in monetary policy and other economic conditions. We saw the global interest rate-cutting cycle start with the Bank of England in August.

This was followed by the European Central Bank in June, whereafter the US Fed cut rates in September with South Africa following suit one day after. Before the start of the cutting cycle, we saw the USD hit historic highs as global currencies chased the high-yielding and stable USD. Since the peak, we have seen a gradual reversal of the strength of the USD.

The S&P 500 experienced significant gains throughout the year, reaching all-time highs. Initially, we saw a massive boom in tech stocks led by Nvidia and Tesla. The cause for this rally was partly due to the expected forthcoming low interest rate environment that the large market participants knew was coming soon.

Heading into the end of the year we saw another bounce in the markets as Trump won the US Presidency. He campaigned on a promise of high growth and low interest rate policies which would support the stock market. His views on global trade relations are questionable, but one cannot ignore the market opinion and reaction to his election, which was positive overall.

The Dollar saw gains across all but one of the G10 nations, depreciating 0.19% against the GBP while appreciating between 2.56% and 7.39% against the currencies of its fellow member countries. By comparison, the British Pound outpaced G10 currencies by 0.19% against the USD and up to 7.59% against the rest.

What about South Africa and the Rand’s performance?

2024 was a volatile year for the Rand but it wasn’t an entirely negative one.

  • The year opened with Rand at 18.50 to the Dollar, peaking at 19.30 before declining to 17.0 and closing at 18.14.
  • The GBP opened at 23.27, peaked at 24.46, bottomed out at 22.42 and closed at 23.05. 
  • The EUR opened at 20.16, peaked at 20.93, bottomed out at  18.66 and closed at 19.08. 

Overall we saw the ZAR strengthen against most currencies globally, with volatility around the US elections and geopolitical issues swaying its value. This is in comparison to 2017, when it traded at about R13.00 against the Dollar, and 2018, when it weakened to close to  R14.00.

In February, Finance Minister Enoch Godonwana announced that, over the next three years, the drawdown of R150 billion from South Africa’s Gold and Foreign Exchange Contingency Reserve will help to keep the country’s borrowing and debt service costs low.

The suspension of load shedding since 26 March 2024 has helped ease the strain on South African businesses and improve overall investor sentiment towards the country.

The Rand faced some instability following the national elections in June and the formation of the Government of National Unity. The exchange rate was between R17.80 and R18.65 to the Dollar shortly after the political shakeup, but strength in the longer term was predicted.

The South African Reserve Bank (SARB) initially projected to ease interest rates to stabilise the economy and encourage growth but reduced its policy rate by 25 points to 7.75% on 22 November 2024. The Rand faces a mixed outlook in 2025. 

How are the BRICS countries making strides?

Last year saw the emergence of a multipolar economic system with BRICS – a bloc that now comprises the nations of Brazil, India, China, South Africa, the United Arab Emirates, Russia, Egypt, Iran and Ethiopia – in talks to create a rival to the Society for Worldwide Interbank Financial Telecommunications (SWIFT) payment system through BRICS Pay, a new cross-border alternative.

This disruptive new take on global payments aims to secure the benefits of a decentralised platform while avoiding international sanctions and allowing countries to trade in their own currencies, all while making them cheaper and bringing about a greater sense of financial inclusion. Where it will go in 2025 remains to be seen.

In 2025, BRICS nations may find themselves on the back foot with Trump’s plans to shake up global trade. The US President has threatened to impose 100% tariffs on BRICS nations to counter alleged, long-term plans from the bloc to create a singular currency to distance themselves from the Dollar. 

South Africa's Department of International Relations and Cooperation has denied the allegations but maintained that its member nations are working to increase trade using their own currencies. BRICS member countries' investments currently exceed $30 billion. 

How did international relations impact forex?

Russia’s ongoing war on Ukraine also impacted foreign exchange rates, especially emerging market currencies like the Rand. 

Another major conflict that sent shockwaves through the global forex market is the Israel-Palestine conflict. The Bank of Israel announced on 9 October that it intended to dispose of $30 billion in foreign currency in response to the clashes. This was to stabilise the financial situation and help the Shekel recover from previous declines. The conflict also resulted in a rise in oil prices and a general risk of sentiment in the market which negatively influenced emerging markets.

The repercussions of the current political climate in 2025 on commodity-dependent countries and central bank policies are yet to be determined. Gold, however, may continue to see price increases thanks to its nature of being a less risky asset.

As for China, the deputy director of the country's central financial and economic affairs, Han Wenxiu, predicts the country's economy will grow by 5% this year. China plans to issue more debt and loosen monetary policy in this respect while also bracing for trade tensions as Trump assumes the Presidency. However, China is still reeling from a deterioration in property investment, which saw a 10.4% decline from 2023 in the first eleven months of 2024. 

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