Currency traders looking to profit from price swings

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."

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.