BofAML noted today that forex volatility has fallen again to record lows:
The persistent drop in rates and FX vols has been the most prominent market trend since the Fed tapering scare last summer. In most cases, realized volatility is even lower than implied. Last time vols were so low, East Asia, Russia or the whole world blew up (Chart 1). Selling vol has been the best trade so far this year, but history is strongly against doing so at such low levels.
In Australia we’ve got an overvalued dollar, an equity market that won’t go down, banks and property priced for perfection despite a huge capex cliff. What could possibly go wrong? Ask Saxo Bank:
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
