Volatility in foreign exchange markets, after falling to some of the lowest levels since before the financial crisis, has nowhere to go but up as emerging economies falter, say the world’s biggest dealers.
Foreign-exchange managers who sold currencies as they became overvalued beat both trend-seekers and traders analyzing interest-rate differentials this year, the first time they’ve won out against these strategies since 2005.
The euro may fall if the region’s financial institutions get more cash than analysts estimate in the European Central Bank’s tender for three-year loans, said Deutsche Bank AG’s head of foreign-exchange strategy.
The dollar fell, snapping three days of gains versus the euro, on speculation that Federal Reserve officials will signal further measures are needed as part of the central bank’s quantitative-easing plan to support growth.
The dollar’s drop against the euro and yen this week in the face of falling stock markets signals more weakness as investors reduce bets on rate increases by the Federal Reserve, according to Deutsche Bank AG.