Overnight implied volatility on the South African rand touched the highest level in more than two and a half years on Tuesday, ahead of a decision by lawmakers on whether to proceed with impeachment proceedings against President Cyril Ramaphosa.
Implied volatility, a gauge of expected swings in the currency, rose as high as 35%, the most on a closing basis since April 2020.
Volatility has surged across the curve, with one-week levels touching November 2020 highs.
On spot markets, the rand slipped about 0.5% to the dollar to a one-month low of 17.7.
Domestic as well as global factors will determine how the rand trades on Tuesday.
At home, South Africa’s lawmakers will decide whether to institute impeachment proceedings against President Cyril Ramaphosa, three days before the governing party meets to consider re-electing him as its president.
Globally, traders await US inflation data that could either boost the dollar or knock it lower. That means the rand, considered an emerging market proxy, could end the day as a winner or loser.