FX Volatility is Back ! What Are You Waiting For ?

We have been hearing about low vols and more low vols since June but there was nothing we could do about it. And now I am hearing that JP Morgan’s fund is up 10% in August alone because of the vols explosion (should be double in Sept ?).

Bankers have spent the past year selling bonds because the other products could not sell as their volatilities were too low, making the prices look slightly absurd.

Good news ! Volatility is back, at least, in the currencies.

WCRSTable : Exchange rate change (%) vs the USD

Since the start of the month, the table shows the changes in some of the currencies against the USD with some of the developed currencies behaving like EM, eg. NOK, AUD, NZD and JPY.

What has happened is a rare event. Busting out of the 2% standard deviation trading range that happens the rest of the time.

If it does not mean anything to you, take a look at the 1M ATM (At The Money) vols changes from a week ago.

fx vols

I highlighted a few that may be of interest to us which will enhance those fixed deposits we have in the banks.

Given that the banks typically shave about 2% (depending) off the rate, we are looking at decent returns still.

Take AUDUSD for example, if you feel you would not mind AUD at 0.90 to the USD. The yield you are looking at would be about 9% (before banker’s haircut) for 1 month, annualised.

That is better than some bonds, I expect, even if it is only for a month.

Better still for Gold and Silver lying there in the accounts.