FX Markets Are Stuck in Low-Volatility Quicksand With No Escape
Strategist Horwitz Sees a Breakout for U.S. Dollar
This article is for subscribers only.
Currency markets are trapped by low volatility and only a fundamental break of historic proportions can shake them free.
Foreign exchange trading has become significantly less responsive to shocks, and when currencies do react it typically isn’t long before they go calm again, according to a study by Bank of America Corp.’s Alice Leng. The New York-based analyst has a model for assessing the “stickiness” of FX volatility, and it suggested that it’ll take six times as much effort to move FX volatility higher than it did over the previous 15 years, Leng wrote in a note on Monday.