The Emerging World's Most Unruly Currency Has Taken a Chill Pill
(Bloomberg) -- The unruly child of emerging markets is calming down, thanks to Cyril Ramaphosa.
Expected price swings in South Africa’s rand have dropped by the most among global peers this year, according to data compiled by Bloomberg. The currency’s one-month implied volatility versus the dollar is now at the lowest level since December 2014.
That’s quite a turnaround from a month ago, when the rand’s actual price swings topped those of 31 major developed-nation and emerging-market currencies. Political and economic reforms ushered in by Ramaphosa’s administration have spurred gains in the rand and fueled inflows into the country’s stocks and bonds. That coincided with improving global risk appetite and a rise in prices of the commodities that account for the bulk of South Africa’s exports.
“Ramaphosa will not be able to carry out his full reform agenda, but he will have the benefit of the doubt until the elections in 2019,” says Per Hammarlund, the Stockholm-based chief emerging-markets strategist at SEB SE. Strong commodity prices in coming months would also reduce volatility, he said.
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