Current market pricing suggests that uncertainty about the outlook for the USDZAR (measured as the standard deviation of the options-implied distribution) is low compared to history, and is lower than at the start of the year. The skewness of the USDZAR probability distribution measures the implied risk that the ZAR could move in a particular direction and its kurtosis captures the implied risk of very large ZAR changes. Although options prices have generally been skewed towards depreciation, the market is pricing in slightly lower risk of ZAR depreciation than it has historically. Options prices also imply that the market is expecting a lower risk of very large exchange rate changes compared to the last 15 years, particularly at a 3 month horizon. Both skewness and kurtosis are, however, up compared than at the start of the year.
