A gauge of expectations for currency volatility surged to an eight-month high this week as traders were faced with re-evaluating prospects for global growth, U.S. monetary policy and the spread of Ebola.
Demand for haven assets drove the biggest two-week gain in the yen since June 2013 as equities and bond yields plummeted. The dollar was set for a weekly drop against 11 of 16 peers as traders pushed back expectations for a U.S. interest-rate increase. New Zealand’s dollar slid as much as 1 percent before paring losses after its central bank erroneously republished September comments saying the currency’s level was unjustified.
“Volatility has jumped across all asset classes, including FX markets,” said Greg Gibbs, the head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc in Singapore. “You can put it down to the weaker economic outcomes we’ve seen lately — German data has been soft, Chinese data has been soft, and there’s Ebola.”