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Currency Market Volatility Is Down to More Than Concerns Over Ukraine

  • Short-term hedging costs in the euro rise on geopolitical woes
  • Volatility demand further out is all about rate differentials
Ukrainian Military Forces near the town of Chuguev, Kharkiv region, Ukraine on Feb. 10.

Ukrainian Military Forces near the town of Chuguev, Kharkiv region, Ukraine on Feb. 10.

Photographer: Sergey Bobok/AFP/Getty Images

There’s more than meets the eye when it comes to volatility in the currency market. 

Investors have long anticipated the return of wide price swings in FX and not just because they trail volatility in the rates and stocks space. Policy makers scaling back on stimulus at different rates was expected to bring about a new regime where the relative calm in the major currencies in place since early 2017 would be no more.