Dollar Hedging Costs Fall to Their Lowest Level This Year

Investors' costs for hedging against dollar volatility have fallen to their lowest level this year as markets see a lower chance of a major near-term shock to the currency. According to Odaily, Bloomberg's one-month implied volatility index for the Bloomberg Dollar Spot Index fell this week to its lowest level since December and has eased sharply from the peak reached after market swings triggered by the outbreak of the Iran war in March. Market participants said traders are not currently pricing in a sharp dollar volatility risk, even though the outlook for Federal Reserve policy remains uncertain and tensions in the Middle East continue to rise. The report said the decline in dollar volatility reflects some easing in concern over future exchange-rate conditions and shows the market is waiting for new macroeconomic catalysts.