Currency Markets Warn of Turbulence Ahead
- U.S. dollar is likely to be an outsized driver of risk: LGIM
- Correlation between currency, stock volatility is negative
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The U.S. dollar is driving a wedge between volatility expectations for global currencies and U.S. stocks.
The greenback’s plunge last month jolted currencies so profoundly that a gauge of expected swings in the market is no longer moving in tandem with a similar measure for U.S. equities. So much so that the 40-day correlation between the JPMorgan Global FX Volatility Index and the VIX Index of U.S. stock swings fell below zero this month to the lowest since 2009.