ANALYSIS: Rand traders’ wild ride is far from over
Traders appear uncertain whether the currency is headed higher or lower
The rand’s roller-coaster ride isn’t over yet — but traders appear uncertain about whether it’s heading up or down. The South African unit, which has swung from being the best- to the worst-performing major currency against the dollar this year amid political tension and a faltering economy, is set for more volatility, based on options contracts. One-month dollar-rand implied volatility soared to the highest in two years on Wednesday as traders hedged for big moves either way in the run-up to the ruling African National Congress’ leadership election in December. The premium of options to sell the rand over those to buy it — known as the risk reversal — has dipped, however, suggesting traders are taking some bearish bets off the table even as hedging remains skewed toward the currency weakening. Reports that Deputy President Cyril Ramaphosa, investors’ favourite candidate, is leading the race to take over as ANC leader from President Jacob Zuma have buoyed the rand. A win for Ramapho...
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