Currency volatility to surge as US election looms

Volatility in the $5.1-trillion-a-day foreign-exchange market is down, but not out, according to UBS.

Currency swings will increase later this year as investors weigh the potential outcome of the US presidential election and the likelihood of a Federal Reserve year-end interest-rate increase. The predicted volatility resurgence follows a period of calm that started in July, after traders absorbed the initial shock of the UK's Brexit vote. A JPMorgan Chase & Co. gauge of currency volatility fell to a two-week low this week.

It's been a year of ups and downs for the dollar on mixed signals from policy makers amid prospects for Fed monetary tightening. The central bank scaled back its outlook for interest-rate increases this week, further dimming the outlook for the greenback, which has declined almost 4 per cent this year.

Bloomberg