State Street’s Chart of the Week – Few Signs of Panic in USD-Asia Volatility

Please see below the latest ‘Chart of the Week’ from State Street Global Markets.

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Few Signs of Panic in USD-Asia Future Volatility

“Since news of the Coronavirus first reached a mass audience and regional quarantines were put in place, FX option markets have responded in pricing for greater future uncertainty, but, somewhat surprisingly, to only a modest degree*. We infer from this that markets are expecting a forceful policy response to a growth slowdown, limiting future volatility. China has already announced a package of easing measures that seem sufficient to forestall a dramatic shift higher in implied volatility. However, whether those efforts will be sufficient and successful over the longer-term is to be determined. If protection against a worsening global growth or risk outlook is desired, volatility markets still offer plenty of attractive opportunities.”

 

*To show this, we have taken an average implied volatility of the US dollar to the China Offshore Spot (CNH), Taiwan Dollar (TWD), Singapore Dollar (SGD), South Korean Won (KRW), Thai Baht (THB) and Indonesian Rupiah (IDR), in each of five points on a volatility curve.

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Expiration date: February 28, 2021

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