(Bloomberg) — Currency traders are enduring the most- volatile February in six years, and implied price swings suggest more fluctuations ahead.
Realized three-month volatility for the yen has risen to 10.5 percent, the highest since March, and a measure of future volatility is approaching the highest since 2013. For the British pound, historic volatility has shot up to 9 percent and implied fluctuations are nearing 12 percent, the highest in almost a year.
Measures of implied volatility typically exceed those of historic price swings to capture future outcomes. Slowing growth in China and patchy economic data in the U.S. have raised the stakes for central-bank policy, suggesting recent moves may be the tip of the iceberg as Group-of-20finance ministers and central bankers meet in Shanghai starting Friday.
“If February is supposed to be calm, and its volatile, then the volatility expected in March is higher because there will be central banks returning and we will get some answers to the questions that are hanging,” said Alfonso Esparza, a senior currency analyst at Oanda Corp. in Toronto. “Political uncertainty is high on the agenda.”
JPMorgan Chase & Co.s global currency volatility measure has averaged 11.5 percent this month, the most for a February month since 2010.
The yen slipped 0.6 percent to 112.84 as of 9:38 a.m. in New York, while the pound added 0.1 percent to $1.3930, its first gain in four days.
Traders foresee bigger swings in the yen than in the pound in the next three months, even as the U.K. prepares to vote on whether to remain in the European Union.
With the U.K.s June 23 referendum beyond the scope of the three-month time period, the prospect of the Bank of Japan intervening in currency markets to curb gains in the yen is proving a bigger driver of implied volatility. The BOJs unexpected expansion of stimulus last month hasnt stemmed the strength in the yen that made it thebest-performing major currency this year, with a gain of more than 7 percent against the dollar.
The new information that has been processed by the markets is the question of whether central banks are nearing the limit of their ability to soothe market fears, said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. For the U.K., markets knew the referendum was coming.
–With assistance from Mika Otsuka, Manisha Jha, Keith Jenkins, Kevin Buckland and Candice Zachariahs.