In my inaugural Vol Around the World post last week, I wrote that, aside from USD / JPY, all other assets on the list basically had implied volatility near 1 year lows. Implied volatility has moved even lower in most global equity markets since then (with the exception of the Nikkei), but the FX market has shown an uptick in implied volatility in the last week.
Here is this week’s Vol Around the World snapshot, courtesy of Bloomberg:
Source: Bloomberg
As you can see, the blue dots (current implied vol) are mostly at the left-most edge of the 52 week range. However, in the currencies section, EURUSD, GBPUSD, and USDCHF have all edged higher, close to their 12 month average, and USDJPY vol is at 52 week highs. In addition, gold volatility (sometimes viewed as an alternate currency) has moved a touch higher as well, no longer at 52 week lows.
The heated rhetoric surrounding the currency wars I discussed yesterday is starting to affect currency market prices. Meanwhile, equity market volatility remains subdued as every major market with the exception of Japan exhibits realized and implied volatility near 1 year lows. It’s a rare backdrop to start the year, which usually begins with more options buying as institutions initiate new positions. For now though, equity options have few buyers.