Implied volatility levels are falling, suggesting options traders anticipate price swings to moderate in the coming weeks and months. Three-month implied volatility for the rand versus the dollar is near its lowest level in more than two years.<\/p>\n\n\n\n Risk Reversals<\/strong><\/p>\n\n\n\n The cost of hedging against rand declines is falling. One-month risk reversals \u2014 the premium of options to sell the currency over those to buy them \u2014 are around a six-month low.<\/p>\n\n\n\n Bond Demand<\/strong><\/p>\n\n\n\n Tuesday saw the strongest demand from local banks at a government bond auction since July 2021, and foreign investors are also returning to the market. <\/p>\n\n\n\n Non-residents bought most South African bonds on a net basis on Tuesday in four months, according to JSE Ltd. data. Inflows this quarter amount to 17.5 billion rand ($965 million), according to JSE data tracking settled trades.<\/p>\n\n\n\n Carry Trade<\/strong><\/p>\n\n\n\n Lower volatility and yields among the highest in emerging markets are boosting the rand\u2019s appeal for investors who borrow at low interest rates to invest in assets that provide a higher rate of return, known as the carry trade. <\/p>\n\n\n\n The dollar-rand carry trade has returned 4.7% this quarter after losing 8.2% in the first nine months of the year. That\u2019s stoked demand for South African bonds: the Bloomberg EM Local Currency South Africa Bond Index had its biggest daily gain in four months in dollar terms on Tuesday, and is trading near the highest level since July.<\/p>\n\n\n\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2023\/11\/Volatility.jpg\")
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