South Africa’s Rand Is Losing Its Reputation for Wild Volatility

A gauge of expected volatility for the rand versus the dollar is at its lowest level since the turn of the century, suggesting traders expect little upheaval for the South African currency as the year draws to a close.

One-month implied volatility fell to 7.9%, the lowest since February 2000. The measure has plunged from as high as 15.55% in April, when President Trump’s tariff announcements roiled global markets.

The rand often trades as a proxy for emerging-market sentiment, making it vulnerable to sudden price swings. But an improving fiscal and economic backdrop, moderating inflation and elevated commodity prices have supported the currency this year, fueling a 10% gain against the dollar.

Expectations that the Federal Reserve will cut interest rates are also boosting the relative appeal of high-yielding currencies like the rand. Foreign investors have been net buyers of 175 billion rand ($10 billion) of South African bonds this year, according to National Treasury data.

“We are seeing a global environment of Fed easing, stable global growth and metals prices going up,” said Anders Faergemann , a portfolio manager at PineBridge Investments. “Domestically, the institutional framework is also signaling marginal improvements with the South African Reserve Bank doing a great job, which further points to a stable market environment.”

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The coalition government that came into power after elections in May has started winning over investors with reforms aimed at boosting the economy, while the South African Reserve Bank has kept real interest rates high to bring inflation closer to its 3% target.

Data this week showed that gross domestic product grew at a faster-than-expected pace in the year through September, strengthening the government’s hand in its quest to curb the fiscal deficit. Soaring prices of gold and platinum have improved the country’s terms of trade.

Measures of rand-dollar implied volatility for three, six and 12 months are also at more-than-two-decade lows.

“South Africa is in a virtuous circle at the moment,” said Cambiz Alikhani , a fixed-income strategist at Novate Global Markets Ltd. “I would expect the current calm to continue for a while and see the main risk as external rather than internal in the short term.”