Graph below shows a ratio of BofA's MOVE Index / JPM FX Volatility Index, historical data
The ratio between rates and fx vol has recently extended into extreme levels, historically, this is followed by either a catch-up in currency vol or a pullback in rates vol
Looking at 23 years of data, the average of the series sits back at 8.96, with the last reading at 14.119, the ratio is more than 2-standard deviations from its long-term average
We are highlighting the last occasions where the ratio extended to such extreme levels (above 17.0), the most recent is March 2023, January 2008 and July 2003 preceded. Each of the prior episodes were followed by dollar softness
In 2008, we saw the dollar falling 3.4% after 3-months. Back in 2003, the USD declined 4.3% over this same period. A year after the rise in the ratio, we saw a mixed performance.
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