Currency volatility gauges ignite as Turkish lira turmoil spreads

FILE PHOTO: A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul
FILE PHOTO: A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, Turkey August 2, 2018. REUTERS/Murad Sezer/File Photo

August 10, 2018

By Marc Jones

(Reuters) – Currency volatility gauges erupted across FX markets on Friday, as a 12 percent crash in Turkey’s lira triggered a global wave of turbulence.

Lira one-week implied volatility spiked to a record high of over 60 <TRYSWO=FN> while the one and three-month equivalents both surged to their highest since global financial meltdown of 2008 <TRY1MO=FN> <TRY3MO=FN>.

There was a wider market spillover too, in other sensitive emerging market currencies such as the South African rand and Russian rouble most prominently, but also among many major FX pairs market.

Euro-dollar and euro-yen one-week, one-month and three-month implied volatility levels all jumped to their highest in six weeks <EURJPYSWO=FN> <EURSWO=FN>, while sterling-dollar 3 month levels <GBP3MO=FN> hit a five-month high as Brexit nerves compounded the problem.

(Reporting by Marc Jones and Tom Finn; editing by Helen Reid)