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The World's New Fear Gauge Is Ringing Alarm Bells in the Era of Trump

A key barometer of risk aversion soared after Trump's victory fueled a dollar rally
Japanese 10,000 yen and U.S. 100 dollar banknotes are arranged for a photograph in Tokyo.
Photographer: Tomohiro Ohsumi/Bloomberg

Once upon a time, the cost to hedge currency risk in global trade and finance was relatively cheap. How things change. 

In the pre-crisis heyday, when the cost to procure dollars staged an uptick — implied interest rates in the currency market exceeding corresponding rates in the cash markets by a notable margin — banks would subsequently arbitrage away the difference, and move the gap close to zero.