Why Currency Volatility Remains Historically Subdued
Implied volatility across major currency pairs sits near multi-year lows. We look at the structural explanations.
This article is general market commentary and does not constitute personalised investment advice. Market commentary reflects the author’s analysis at the time of publication and may change without notice. It should not be interpreted as a prediction or guarantee of future market performance.
Implied volatility, the market’s pricing of expected future price swings, has remained low across major currency pairs by historical standards.
Explanations include more predictable central-bank communication, similar policy cycles across major economies and the growth of systematic strategies that sell volatility.
Why low volatility can change quickly
Periods of low volatility have ended abruptly in the past, often after an unexpected policy or economic shock. Low implied volatility is not a measure of low risk, particularly for leveraged positions.
Sources and data
- Bank for International Settlements, FX market research
- Exchange-published implied volatility indices
Corrections and updates
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