The rand’s implied volatility against the dollar tells you one thing about the currency in 2019: it’s going to be a wild ride, it’s just not clear which way.

The cost of hedging in the options market against price swings in the rand over the next year has climbed almost 500 basis points since April. Though it has moderated from its September high, it’s still about 200 basis points above the five-year average. The rand has been buffeted by trade tensions between the US and China, SA’s biggest trading partner. The way that dispute pans out remains a risk in 2019, along with the US Federal Reserve’s policy path, the trajectory of global growth, and commodity prices. Meanwhile, the country is one step away from a trifecta of junk credit ratings, and a national election in May will add to local risks. The uncertainty is reflected in analysts’ forecasts for the rand: though the median is for the currency to appreciate more than 2% to R13.95 to the dollar by end-2019, the range of pr...

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