The yen and the Swiss franc strengthened on Wednesday after Pakistan shot down two Indian jets. Investors were sent out of riskier markets and into safer assets.
The Japanese and Swiss currencies both tend to appreciate during bouts of political and economic uncertainty. Pakistan said it downed the planes a day after Indian warplanes struck inside its territory for the first time since 1971.
The franc scaled a 3-week high of 0.9967 against the dollar and the yen rose to 110.355, its strongest since Feb 15.
Forex Volatility
Forex traders hope for March relief from volatility doldrums. Price swings in the world’s most-traded currencies have plummeted. Traders are hoping events such as Brexit will shake up moribund markets next month.
U.S. President Donald Trump’s move this week to delay tariffs on Chinese goods, welcomed by investors eager for an end to trade conflicts, should also suppress volatility.
So far in 2019, euro/dollar has traded within a range of 3.365 cents — between $1.1570 and $1.1234.
Dollar/yen volatility — vol in traders’ parlance — is nearly a third of early January levels. The implied volatility curve is the lowest in five years.
Even sterling, highly sensitive to Brexit headlines, has seen volatility fall to two-thirds of November levels.
Implied one-month and three-month sterling-dollar vol remain well below late-2018 levels. It’s a similar story in euro/sterling.
Investors are even less confident about large euro/dollar moves, with one-month implied vol stuck near 14-month lows. The three-month contract is around its lowest since August 2014.
Options markets imply euro/dollar will move in a range of 1.5 cents over the next month — keeping it firmly between $1.12 and $1.15.
START TRADINGForex – Commodities – Yen and Swiss Franc strengthened
The dollar hovered near a three-week low after shedding 0.4% overnight on comments from Federal Reserve Chairman about the central bank’s shift to a more “patient” policy approach.
The dollar index against a basket of six major currencies was down 0.1 percent at 95.928.
Investors are keeping an eye on the U.S.-North Korean summit, which begins in Hanoi later on Wednesday. U.S. President Donald Trump will meet North Korean leader Kim Jong Un for their second summit. The United States push North Korea to dismantle its nuclear weapons program.
The euro moved a touch higher to hit a three-week high of $1.1399. The euro/dollar exchange rate has been helped by a stronger British pound recently.
Elsewhere, investors watched sterling closely as it rose above $1.33 for the first time in five months. The pound rallied on Tuesday after British Prime Minister Theresa May offered lawmakers the chance to vote on delaying Brexit.
Sources: Reuters, Investing, CNN money
PLEASE NOTE The information above is not investment advice.