Currency traders are detecting the first signs of what they have been waiting for all year: a revival in volatility that may help trim their losses. Tensions in Ukraine and Gaza, together with interest-rate increases from New Zealand to South Africa, are helping push up a measure of price swings by the most since January. Volatility had flattened in recent months as policymakers continued to provide unprecedented amounts of cheap cash to spur growth. While rising volatility increases uncertainty and risk, it also creates opportunities for traders to profit on changes in exchange rates. Parker Global Strategies' index of currency returns rose 0.5 per cent last week in its biggest gain since March. "We've seen some tentative signs that volatility is picking up," said Ian Stannard, the head of European foreign exchange strategy at Morgan Stanley. "Given this is the first movement we've seen for quite some time, I'm putting quite a bit of emphasis on to that. A few bits and pieces are starting to fall into place to support this change in market behaviour." Bits and pieces are starting … to support this change in market behaviour IAN STANNARD, MORGAN STANLEY JP Morgan Chase's Global FX Volatility Index rose for the past three weeks, climbing from a record low in the most sustained run of increases in six months. The gauge reached 5.6 per cent yesterday, up from a record closing low of 5.29 per cent on July 3. The index had fallen from a high for the year of 8.98 on February 3 and a peak of 27 per cent during the worst of the global financial crisis in October 2008. Price swings have widened this month for nine of 31 major currencies, led by Israel's shekel and with Russia's rouble in the top five, based on one-month options. As well as geopolitical tensions, volatility is also increasing as central banks start raising borrowing costs after years of rate convergence. In March, New Zealand became the first developed country to lift rates since 2011, and traders are speculating the Bank of England is preparing to tighten policy next year. Russia unexpectedly raised the one-week auction rate on Friday and South Africa lifted its benchmark this month by more than economists forecast. "The main driver that we think can push volatility higher is for monetary policy divergence to pick up," said Anezka Christovova, a foreign exchange strategist at Credit Suisse. "But we need stronger divergence in data and actual policy steps to really confirm that pickup." A policy split between the US Federal Reserve and European Central Bank led to the euro falling to an eight-month low of US$1.3422 on Friday and is pushing it outside its trading range of five US cents in the first half of the year. Implied three-month volatility in euro-dollar, the world's most-traded currency pair, rose to as high as 5.47 per cent last Wednesday, from a record low 4.75 about a week earlier.