Traders are just fine with the rand at its strongest level against the dollar in more than three years, volatility measures show.

The South African currency strengthened 14% against the greenback in 2025 and extended gains this year, buoyed by record-high precious-metal prices and improving investor sentiment as economic reforms were rewarded by a credit-rating upgrade from S&P Global Ratings in November.

That’s pushed the rand to overbought levels, according to the Relative Strength Index, a technical indicator that some traders use to identify potential turning points. Options pricing, however, suggests the pivot point hasn’t yet been reached.

Expected price swings for the rand-dollar pair over the next six months fell to the lowest level in almost 25 years this month, while the cost of hedging against rand declines over the period is the least since October.

“I think the rand can maintain its strong performance,” said Sergei Strigo, a portfolio manager and co-head of emerging-market debt at Amundi UK Ltd. “The gold price and terms of trade are supportive. Overall market sentiment is bullish. I do not see the rand weakening if this environment continues.”

In a further sign of investor confidence, the cost of insuring South Africa’s debt against default over the next five years has plunged to the lowest since 2012. The local-currency 10-year bond yield, meanwhile, is at the lowest in a decade, having fallen more than 200 basis points since the beginning of last year.

Bets on Federal Reserve interest-rate cuts this year have weighed on the dollar, giving further impetus to rand gains. The South African currency has returned 3.8% in the dollar-funded carry trade over the past month, the most out of emerging-market currencies tracked by Bloomberg.

“Carry-trade positioning will provide support heading into the new year,” said Hironori Sannami, a foreign-exchange trader at Mizuho Bank in London. He prefers the rand over high-carry Latin American peers like the Mexican peso and Brazilian real because of regional risks related to the conflict between the US and Venezuela.