March 6, 2020 / 9:41 AM / 25 days ago

Euro-dollar volatility jumps to 15-month high

LONDON (Reuters) - The a measure of one-month euro-dollar price swings on Friday hit its highest since November 2018 as coronavirus fears trigger increased volatility across global markets.

Deepening concerns about the health and economic impact of the virus have sent markets into a tailspin, and long dormant volatility in the $6.6 trillion-a-day FX market has been jolted into action.

Euro-dollar one-month implied volatility had hit record lows around 3.8% but started rising sharply in recent weeks and traded on Friday at 7.7%. It traded at 6.75% a week ago.

Euro-dollar 1-month implied volatility: here

The euro has soared towards $1.13 this week, up from less than $1.08 last month.

Analysts say one source of the rise in volatility has been investors closing their carry trade positions, in which they borrow in negative-yielding currencies such as the euro and yen to buy higher-yielding assets in dollars or emerging markets.

Overall currency market volatility, as measured by a Deutsche Bank index, is at 6.45%, up from around 5.4% in late February - a notable rise but still at low levels by historical standards.

Volatlility on equity and bond markets has also risen, with the VIX gauge rising this week to the highest since early-2018.

Bond markets, where yields in the United States have hit repeated record lows, are also seeing far more volatility.

Reporting by Tommy Reggiori Wilkes and Sujata Rao; editing by John Stonestreet

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