The ViewWild swings in global currencies show volatility is alive and kicking
Dollar has been biggest casualty of White House Russia scandal, buoying the euro more than 5.5pc since mid-April, while the yuan has proved remarkably stable
Whoever said volatility had died a death?
Over the past year or so, and particularly in the last several months, much has been made of the dramatic decline in volatility in financial markets. The Vix index, a popular gauge of anticipated volatility in the benchmark S&P 500 Index, fell to a 23-year low earlier this month and currently stands at just 12 points – significantly below its long-term average of nearly 20.
Vix, commonly known as Wall Street’s “fear gauge”, shot up to 15.6 on Wednesday last week (its biggest one-day rise in 11 months
While the Vix, commonly known as Wall Street’s “fear gauge”, shot up to 15.6 on Wednesday last week (its biggest one-day rise in 11 months) as the Russia scandal dogging US President Donald Trump’s administration escalated dramatically, it quickly dropped again as investors put the political turmoil in Washington on the back burner and instead focused on the generally positive economic and corporate earnings environment.
Yet in the US$5 trillion global foreign exchange markets, volatility is surging.
Last week, the US dollar suffered its worst week since February 2016, with the dollar index, a gauge of the greenback’s performance against a basket of its peers, declining more than 2 per cent.
The euro, however, appreciated more than 2.5 per cent, buoyed by the strength of the euro-zone economy and the victory of the reform-minded Emmanuel Macron in France’s presidential election. The yen, meanwhile, strengthened nearly 2 per cent as its “safe-haven” status reasserted itself in response to the turmoil in Washington.
Yet it was Brazil’s currency that gyrated the most.