Vol Around the World – Commodity and Currency Volatility Now Above Average

by Enis May 16, 2013 1:13 pm • Commentary

Volatility in all asset classes has ticked up in the past week, but the real movement has been outside of the stock world.  I discussed in yesterday’s VIX Snapshot some potential reasons why equity volatility was moving higher even as the stock market rallied.  But currency and commodity implied volatility is moving higher for a simpler reason – the assets are getting more volatile.

Implied volatility for most major currency crosses is now above the 52 week average, the first time that has happened in 2013.  The Aussie Dollar saw the biggest jump in implied volatility after its large move lower this week.

Here is this week’s Vol Around the World snapshot, courtesy of Bloomberg:

VCA Snapshot 051613, Courtesy of Bloomberg
VCA Snapshot 051613, Courtesy of Bloomberg

The global macro world is starting to see a more volatile backdrop than the first quarter of 2013, but equity-only traders likely have not noticed.  Volatility first showed up in the commodity complex, when precious metals, oil, copper, and grains all made big moves lower in March and April.  It has now started to show up in the currency world as the dollar starts to rally more violently vs. other currencies.  My trade yesterday is betting that it will eventually spread to the equity world as well.