The significant decline of the Japanese currency index during the reported period was mainly caused by the unexpected announcement of the Bank of Japan, which decided to expand its quantitative easing program in time when analysts expected no changes in the monetary policy stance. Due to that, the JPY Index plunged considerably and made this currency the worst-performing one during the past five trading days. All in all, the JPY Index lost 3.87% from past Wednesday till this week’s Tuesday, while the sharpest drop was registered against the US dollar and Swedish krona, -4.88% and -4.33%, respectively. The period’s best-performing currency was the USD, which gained 1.77%.
Due to previously mentioned unexpected news from the Bank of Japan, the yen’s volatility grew above the market average during the week. However, the period was marked by moderate volatility values. As seen from the table, the Volatility Index for Japanese yen surged to the 1.9 level on Wednesday, when all currencies on the foreign exchange market hovered in a wide trading range because of statement of the US Federal Open Market Committee. The greatest market volatility at the level of 3.01 took place on Friday at the time of BoJ’s monetary policy announcement. However, the average Volatility Index for the JPY returned back to normal at the end of the period.
The Japanese yen’s significance measure, calculated as an average correlation between all JPY currency crosses, started the period at rather low levels of 0.40, helped by lack of local and international economic news. At the same time, the currency began being in focus on the second day of the period and the most important day for it was Friday. On that day, the significance measure jumped to 0.95, considerably higher than the average correlation coefficient of the week at 0.58 points. Last week, the mean correlation coefficient has also exceeded the half-year and annual averages.
The Japanese yen has been clearly the worst performing currency with a significant 3.5% loss over the week, after the BOJ surprised the market by expanding their massive monetary stimulus even more. Also, the Aussie’s performance was disappointing despite the better-than-expected employment numbers. The US dollar, in turn, has spent all the period above the baseline and achieved a great 2% of gains as most of the data from the US were in line with expectations or even better than forecasted. The Euro, however, was more or less stable and with indications to the upside, as for most of the time during the week it was close to 1% mark.
The volatility of the Euro was very similar to the market’s volatility in both elevated volatility portion and especially Volatility Index values. Moreover, looking at the volatility chart it might seem like the market was lacking turbulence; however, the levels of the gauge have improved considerably compared to the last week. Market’s elevated volatility on average was 30% higher than the previous week, when we witnessed a multiple month low of 10%. Nonetheless, the biggest wave of volatility was on Thursday during the ECB’s monetary policy statement and press conference, when Mario Draghi spoke about the problems that the Euro zone is
The period proved to be very unsuccessful for the Euro significance measure, as it started at nearly zero level and through the week fell even lower. This performance was caused by most of the components sliding to weakly negative values, suggesting that the Europe’s single currency was not on the governing side of the exchange rate movements. However, after the ECB announcement unprecedentedly strong correlations between almost all of the currency pairs occurred, since the Euro suddenly became the strongest driver for other currencies in the market.
The USD Index continued to show strong performance throughout the period, ending up among the top three gainers for the third week in a row. The Greenback grew the most against the yen, which remained feeble after the BoJ announced the increase of monetary stimulus on October 31, and the Aussie, whose index went into the sharpest downfall against the background of the strong dollar and decrease in metal prices. Among other USD Index counterparts, the Loonie’s gauge posted the highest spike on Friday, as Canadian job creation data reported a 43.1K rise against the expected 5K fall.
The week was relatively calm for the Greenback with only 28% portion of elevated volatility. Moreover, the greatest peaks of the USD Volatility Index were associated with news from its peers’ economies. The market volatility was on its average historical level – elevated volatility was observed in 31% of time. The highest peaks of both market and USD volatility indexes – 2.5 and 2.23 points, respectively – were reached on Thursday, against the background of ECB press conference on monetary policy, while the EUR Volatility Index reached the 4.5 level. Thus, the ECB statement became the most turbulent event of the week.
The overall level of the USD correlation decreased slightly compared with the previous period, and the significance measure held at the 0.51 mark on average. Most of the components’ mean values also lost about 0.04 – 0.17 points of their previous readings. In turn, EUR/USD correlations with AUD/USD and USD/SEK grew by 0.08 and 0.1 points, respectively. Surprisingly low Swedish industrial production data caused the strengthening of the bond between USD/SEK and most of the other USD pairs. Compared with the long-term values, all components showed the upward trend.
The British currency traded in a more volatile environment during the November 5-11 time period compared to the previous report two weeks ago. In the first two days the currency gained value, while starting on Friday it dropped below the baseline. Over the five trading days the GDP Index decreased 0.13%. However, it remained among one of the best performing currencies year-on-year, along with the US dollar, as they rose 7.1% and 7.59%, respectively. Meanwhile, in a week’s time the pound surged against the Japanese yen, Euro and Swiss franc, gaining 1.23%, 0.13% and 0.08%, accordingly. The sharpest fall was posted against the Loonie by 1.05%.
The period can be considered as active in terms of volatility, as the vast part of the period was marked by uplifted turbulence of the British currency. The portion of elevated GBP volatility was slightly above that of the market. EUR/GBP and GBP/CAD were the only pound’s crosses with the parameter smaller than the market’s average of 29%, and with that posted the lowest elevated volatility portion of 26% and 15%, respectively. Concerning other currency pairs with the pound, GBP/JPY and GBP/SEK posted the highest elevated volatility indicators during the period at 41% and 40%.
Significance level of the Pound, which is calculated as an average correlation between different crosses of this currency, was rather balanced during the period, except for the first two trading days. On Wednesday, the correlation stayed around the 0.55 level, while a day later in dropped down to the period’s low at 0.15. However, the GBP composite managed to stabilize and close the week just below the mean level at 0.30. Radical changes throughout the period were caused by some components falling below the value of zero.
Compared to the last week, when the Yen dropped staggering 3.5%, there is no currency that has lost more than 1.5%. The worst performing currencies have been the British Pound and once again the Japanese Yen that has lost 1.59% and 1.37%, respectively. However, most of the currencies (USD, SEK, CAD, EUR, CHF) did not fluctuate dramatically as they hovered in the range from –0.5% to 0.5%. Interestingly the Greenback has lost its bullishness and it has slipped 0.47% this week. The strongest performer was clearly the Kiwi by adding 1.93% as several positive data pushed the currency higher, with the Aussie following with 1.27% of gains.
This has been a tranquil week for the market with a lack of very important data released and also with a bank holiday due to the remembrance day and anniversary of the Armistice which ended the First World War. The most important releases were not associated with the 18-nation currency and that also resulted in such low volatility readings. Market’s elevated volatility has dropped almost two times compared to the previous week, as it was at 22% in the period. Nevertheless, the highest level of volatility was reached on Friday and Wednesday. The leader in elevated volatility was EUR/CHF that reacted to the release of unemployment rate.
Judging from the average correlation coefficient that shows the overall significance of a currency in the market, the most part of the five-day period the shared currency was far from being the main driver. On Friday the coefficient was above the 50% mark for the only time through the week, when the US jobs data boosted the gauge. The next two days the indicator mostly fluctuated between 0.25 and 0.1, exhibiting no sensitivity to any of the economic releases whatsoever. On Wednesday the average correlation almost reached the 50% mark, when
The week was marked with strong uptrends and downtrends in various currency rates. The yen became the worst performer for the third consecutive week, thus losing 7.44% of its value within a month. In the middle of the week, the pound’s index started to fall, too, and did not retrieve till the end of the period, finishing the week with a 1.74% loss. The Kiwi’s index, in turn, showed a strong uptrend and gained 2.22% of the base value during the period. Similar, but more moderate growth was observed in the Aussie’s gauge. The changes of the rest of the currencies, including the Greenback, remained in a narrow -0.5% - +0.5% range.
In terms of volatility, the period was rather uneventful for both the dollar and the market as a whole. As the portions of elevated volatility were very changeable during the past month, varying from as low as 4% to as high as 50%, the latest values were well in the middle, while the greatest and the average recorded levels of turbulence stood closer to the feeblest readings. Among the dollar components, USD/JPY Volatility Index exceeded its historical average most often, while AUD/USD index reached the highest peak, jumping to the 4 point level with the RBA’s comments on possible intervention. USD/CAD, in turn, was the most stable pair in all aspects.
Compared with the previous week, the USD significance measure and its components have moderately increased. The most noticeable rise was observed in correlation pairs containing the Canadian dollar. Thus, on Monday, ahead of the Canadian housing starts data release, correlation components with USD/CAD have gained about 0.07 – 0.43 points. In turn, the main drop of the past week occurred in the GBP/USD components. On Wednesday, the BoE quarterly inflation report caused the weakening of the bond between GBP/USD and other USD pairs. In general, means of the observed components stoop well above the long-term readings.
It seems that a long-term decrease of the yen index, caused by sluggish economic growth, decreasing inflation and further easing of the BoJ’s monetary policy, is not ready to come to an end in the foreseeable future. During the past five trading days the JPY Index had the second-worst performance along with the GBP gauge. The yen ended the period losing as much as 1.26%, while a 2.04% decrease made the pound the main loser of the period. On the other hand, the New Zealand’s dollar was the best performer during the period, as it’s index grew 1.27% on news that the RBNZ is going to continue tightening monetary stance and keeping mortgage restrictions in place.
The period was associated with uplifted volatility values in the second part of the period and rather high portion of elevated volatility for the yen, compared to the market. As can be seen from the tables, the Japanese yen was the period’s most volatile currency – its Volatility Index reached the 2.48 level early on Monday and 1.70 on Tuesday’s evening. The average volatility index for the whole November 12-18 time period of 0.54 has also been bigger than the mean number for the market at 0.40. Elevated volatility for the yen, in turn, surpassed the market average in all currency pairs and stayed at 43%.
Taking into account the significance levels of JPY, calculated as an average correlations between all currency pairs of the yen, this currency was one of the main drivers last week. Only Thursday stood out for relatively low and at the same time stable correlations below 60% mark. The JPY began the period at a high 0.70 level but started to decrease gradually towards the weekly lows on Friday, as strong data from the United States on retail sales and consumer sentiment had a major impact on all crosses with the US dollar.
This has been a very strong period for the Euro, as the currency gained 0.7% and was among the best performers with the Canadian Dollar, Swedish currency and Swiss Franc. While a clear leader in the negative sense was the Japanese Yen that continued to underperform against all of the currencies for the third straight week, it lost around 2% of its value. Also the Australian Dollar declined, while all the other currencies not mentioned was little changed in the five-day period. However, there are no currencies that performed very well, as none of the majors rose more than 1%, while in the last time of writing two currencies surpassed the level.
Even though there were many important economic data releases through week in the Euro zone, some of the attention was lured away by other more important announcements or data. Nonetheless, in each day at least for some time the volatility index surpassed the normal level. Market’s elevated volatility increased to 26%, after 22% in the previous period, while Euro’s elevated volatility reached 23%, after last week’s drop to 17%. The EUR/CHF cross was the most tranquil with elevated volatility reading only at 8%, which is considerably lower compared to past week’s 32%, when it was the highest level among all the currency pairs.
The Euro significance measure picked up pace through the week, after ending below 0.20 level in the previous period. At the same time, mostly there were nor negative, nor positive correlations between Euro pair’s. The highest level was reached at the first part of Thursday, after the releases of French, German and Euro zone flash manufacturing PMIs that disappointed the Euro bulls. Although, the Euro significance gauge did not manage to hold above the 0.3 mark. Nonetheless, for most of the time through the period the measure was around 0.23.
The USD Index was more confident compared to the previous period, and as its track turned from a flat line to an uptrend, it finished the week with the second highest weekly growth. 0.2 points behind it was the pound’s gauge that surged above 100.5 point level on Wednesday and managed to hold above it for the rest of the period. The best performer, in turn, was the CAD Index, which skyrocketed on Friday, fueled by the stronger than expected Canadian inflation numbers, and posted the highest weekly growth since the end of September. The last day of the period was the most eventful one as it also saw the Aussie and the Kiwi jump in response to the PBOC rate cut, and the Euro tumble with Mario Draghi’s comments on the urgency of the inflation raise and the ECB’s readiness to widen its asset purchase plan.
The overall level of the USD volatility has fallen palpably at the end of October and still has not returned to higher levels. Thus, for the second week in a row, the USD Volatility Index managed to exceed the 1-point mark in only 26% of time. The strength of the volatility surges was also rather moderate, and the maximum peek was only 2.12 points high. In turn, the market volatility has slightly increased compared with the previous week and caught up with the dollar’s gauge, while its maximum peek exceeded that of the Greenback.
The average correlation of the observed USD pairs, which measures significance of the currency, was varying in a wide range of 0.25 – 0.69 points. As can be seen from the violin graph, the correlations during the week were mostly on or below the average correlations of a wider window.
Unlike the previous week, during November 19-25 time period the British pound had a clear trend to gain value. The currency stayed above the baseline for most of the time and managed to surge 1.13% from Wednesday to Tuesday. Therefore, it took the first place among the best performing currencies on the market last week. It surged against its all major counterparts, showing the strongest climb versus the Aussie and Kiwi by 2.38% and 1.59%, respectively. Moreover, the Pound outperformed its Canadian peer, which increased 1.06% during five days and took the second place on the pedestal.
As can be seen from the main volatility chart, the period with the highest turbulence took place in first three days of the period, and especially on Wednesday and Friday. The portion of elevated GBP volatility was slightly above that of the market. GBP/SEK was the only pound’s cross with the parameter smaller than the market’s average of 24%, and with that posted the lowest elevated volatility portion of 19%. Besides that, the most traded GBP pair, the one with the US dollar, showed the largest elevated volatility index from Wednesday to Tuesday, as it has been increasingly turbulent in 40% of the time.
Significance level of the GBP, calculated as an average correlation between different crosses of this currency, was much more volatile during the period, as important news from Britain and other countries significantly weighed on the UK currency. The first major hike of the correlation index up to 0.61 took place on Wednesday. However, the GBP composite managed to stabilize and decreased slightly to the period’s average levels and oscillated just below this level for the vast part of time from November 21. The weekly low at 0.16 was reached on Tuesday, reflecting the smallest correlation among different GBP-crosses.
Because of Mario Draghi’s pessimistic comments on the Euro zone’s economy on Friday, November 21, the single currency started the week at weak position and was growing steadily throughout the observed period. Thus, the Euro and its Swiss counterpart became the top performers of the week. The Greenback continued its steady appreciation and took the third place in terms of index growth. The Aussie, in turn, showed the worst results. Its index managed to lose almost twice as much as the gauge of the second worst performer, the Loonie, which, just like the Euro, returned to the previous Thursday’s level.
The market’s volatility levels remain changeable, and the past week fell on another period of subdued turbulence, with elevated volatility portion below 20% and the index peaks on moderate heights. The dollar’s readings were well in line with the overall market’s mood, and its components mainly followed the paths dictated by the Greenback’s counterparts. USD/JPY was the dollar’s calmest pair, both in terms of the overturbulance portion and the maximum index value, while USD/CAD, GBP/USD, and AUD/USD showed the most disturbance.
The past period was quite a turbulent one for the dollar’s significance measure. There were some ups-and-downs, and the measure fluctuated in a range from 0.3 to 0.6 points. However, the composite’s average value, as well as the averages of most of its components, stayed at about the same level as in the previous week. The most noticeable changes were observed in the EUR/USD correlations with AUD/USD and USD/CAD, whose average values reduced by 0.2 and 0.1 points, respectively. Compared with the longer-term records, the average correlations somewhat declined, and the lower tails of distributions shifted down and became heavier.
The Australian dollar was in the list among the worst performing currencies in the period from November 26 till December 2, as its currency index declined 0.29% in overall amid rather mixed fundamental data. Having a look at components, the AUD rose against three majors, including the Yen, Loonie and Swedish Krona by 0.12%, 0.22% and 0.28%, respectively, but lost value versus other currencies. Among other negative performers, the Swedish krona dropped 0.61% from Wednesday till Tuesday, while Japanese yen slipped as much as 0.42%. On the other hand, US dollar and the Kiwi surged 0.87% and 0.62%, respectively.
Both the elevated volatility proportions and the values of Volatility Indexes of the Australian currency were well above market average levels during the period. Concerning elevated volatility, It is worth pointing out that especially the AUD/NZD cross was unusually dynamic and became the most volatile pair in terms of this indicator during the period, as it was turbulent in 57% of all time, compared to currency’s average of 43% and market’s mean at 34%. Maximum volatility index for the currency pair was registered at 3.1 points, while the smallest one was posted by the AUD cross with Canadian dollar, namely 1.99 points.
The components of the Australian dollar significance measure showed strong correlations over the observed period. The short-term correlations during the period between AUD/EUR and other AUD crosses varied from 0.07 to 0.95. As seen from the main chart, the smallest correlation was with AUD/CAD, particularly on Friday, when a drop closer to zero provided the component the weakest result of the week, as its correlations stood at 0.07. Compared to the 20-day values, most of the correlation pairs have gained 0.01-0.15 points, but AUD/NZD pair added 0.24.
[ul]
[li]November was full of economic news which shaped economic sentiment of businesses and consumers all over the globe. While some economies, including the US and UK, have been expanding at full speed, others, such as the Euro zone, Japan, and China raise concerns over their ability to sustain growth and ensure there is no negative spillover effect on other economies. This two-speed global growth appeared to weigh on the sentiment of responders who took part in November’s Dukascopy Sentiment Index survey, as the short-term outlook deteriorated to 0.56, while the long-term sentiment plunged by 0.06 points to 0.62, levels last seen in August 2013.
[/li][li]The ECB is still determined to do whatever it takes, including unconventional measures, to bring inflation in the region to healthy levels as soon as possible. Persistent disinflationary trend in the Euro bloc has become a headache for policy makers and growing concerns for economists, as recently implemented fresh stimulus so far failed to provide visible effect. However, Germany, the European powerhouse which had been causing panic among economists due to softer fundamentals, managed to escape technical recession. Thus, the short term sentiment for Europe improved modestly, while the three-year economic mood continues to deteriorate.
[/li][li]Despite a robust growth in the US and Canada, academia experts appeared to be less optimistic about the region’s short-term and long-term economic perspectives, as both gauges fell in November, but remained at strong levels.
[/li][li]Asia-Pacific also saw their sentiment indicators retreating in November, possibly due to growing concerns over Japan’s and China’s economic performance, as world’s leading countries show worrying signs of slowing economic activity.
[/li][/ul]
The Euro has rebounded from last week’s decline, when it slipped against almost all of the major currencies. While this week Euro was outperformed by only the very strong US Dollar and British, Canadian currencies. The worst performer for second week straight is the Australian Dollar. Moreover, it seems that the Kiwi is starting to lose its relatively stable positions and is following its Australian peer due to the price drop in commodities. Also, the Japanese Yen has returned to its losing streak, after gaining for one week. The strongest performers were the US Dollar and British Pound that added 0.77% and 0.46% to their value, respectively.
The market’s and Euro’s elevated volatility has almost doubled since the previous time of writing, as it has reached 45% and 46%, respectively, after being at 25% a week ago. However, the fact that high volatility was observed in 23% of time for some components and 60% for others, pointed out that the turbulence on the market was caused by Euro only not in the majority of cases. Low volatility indexes readings – average values mostly around 0.9 – suggested the same. The peaks of components’ volatilities also were not provoked by the news on Euro zone’s economy; however, that all, of course, is excepting Thursday, when Draghi pushed the
The EUR significance measure was gradually bouncing to higher and lower levels throughout the period and mostly was below the significance threshold of 0.3. However, in general the mean correlation coefficient was higher than the historical values. The EUR/JPY cross has returned to around its 250 day average, after showing less correlation during the last month due to the poor performance of the Japanese Yen. Also, interestingly EUR/CAD correlation coefficient with EUR/USD decreased in the last week.
The past week was a success for the dollar, as it posted considerable gains against its major peers and ended up only 0.1% below the Loonie - the period’s leader. Their Australian counterpart, in turn, was one of the worst performers, and its index suffered the greatest fall, losing 0.62 points over the GDP reading. The greatest, and equally large, surge was observed in the EUR Index, as the single currency was boosted by the ECB statement.
The week was rather turbulent for the market in terms of elevated volatility proportion. Nevertheless, the values of the index were not very high, with the average at 0.95 points. The USD Volatility Index, in turn, had some noticeable spikes, indicating turbulence twice as great as historical. The greatest spikes of almost all index components were associated with Friday’s surprisingly high US nonfarm payrolls data. However, USD pairs with AUD and CAD experienced the highest volatility on Wednesday, against the background of disappointing Australian GDP release and Canadian rate decision, respectively.
The past week was rather tranquil for the US dollar correlations, and there were only a few ups and downs. Mean values of the observed components mostly stayed on the same level compared with the previous week. In turn, tails of the correlation distributions became heavier, indicating the instability of components during the period. The most noticeable changes occurred with the bond between EUR/USD and USD/JPY. An upward trend was observed in the component throughout the whole period, and the gauge ended the week on a very strong level of 0.89, with its average gaining 0.16 points over the previous reading.
The GBP Index was hovering above the baseline for the whole December 3-9 time period on rather positive fundamental data, and at the end of the period posted its greatest weekly growth among all currencies. The index dominated its counterparts throughout the vast part of the period, and with a final 0.68% advance over the base value became the period’s top performer, leaving the second-best CHF gauge behind with a 0.64% rise. However, the pound managed to advance more than 1% only against two currencies, the Australian dollar (+2.17%) and the Kiwi (+1.74%).
From time to tome, the period was notably turbulent, while the pound’s Volatility Index has spent about more than 50% of the first three days above its historical level. The highest portion of elevated volatility in these days was observed in GBP/USD, GBP/SEK, and EUR/GBP around 40%. On the other hand, it is worth pointing out that the average GBP elevated volatility of 38% was just under the market average at 39%. Besides that, surprisingly one of the highest spikes of turbulence was reached by the Pound’s cross with Swiss franc. All in all, the largest GBP volatility peak did not exceed 3 points, but managed to touch more than 2.5% on Friday.
The components of the British pound’s significance measure showed rather small correlations over the observed period, while the overall GBP composite stayed around the average level for the vast part of the period. The short-term correlations during the period between GBP/EUR and other GBP crosses varied from 0.2 to 0.96. As seen from the main chart, the smallest correlation was with GBP/CAD and GBP/USD, particularly on Thursday when a drop below zero provided the component the weakest result of the week, as its correlations stood around 0.20. Compared to the 20-day values, most of the correlation pairs have lost 0.01-0.05 points, but GBP/USD pair tumbled 0.10.
The Europe’s shared currency has gained for a second straight week as it added 0.31%. A clear worst-performer remains the Australian Dollar that has lost more than 4% in the last month. The Canadian Dollar also performed poorly by declining 1.12% in the period, as the oil prices remain very low. However, the best-performers were Japanese Yen and the British Pound, if the Yen rebounded from the last week’s losses then the Sterling has prolonged its advance. Interestingly, the Japanese currency breached even the 1.5% mark on Thursday; however, it failed to sustain the gained bullish momentum.
The market’s elevated volatility remained near the same levels as it were last time of writing, while the Euro was a little calmer compared with the previous week. Most of the currencies were not very volatile, as the measure was around 30%; however, there certainly were some exceptions. For instance, EUR/JPY reached as high as 62%, which is of course above the average value and a substantial increase since a week ago. At the same time, EUR/AUD pair’s volatility was elevated only in 21% of all cases and it is a substantial drop from the past week’s 60%. Also, EUR/CHF fell from 58% to 30% in the period from 5th to 12th of December.
The correlation graphic perfectly shows that the Euro zone was lacking important news and the impact given by the area was minimal. The composite ranged from 0.10 to 0.20 for most of the time, which is low to say the least. The greatest correlations were seen on Friday when the significance measure was near the 0.5 mark. The mean correlation coefficient was not just low, but it was also well below the historical average, as it stood at 0.16. EUR/USD and EUR/CAD correlation was leading the parade, as it returned above the 0.50 level and it even surpassed the 0.60 mark.
After the yen’s 1.5% loss during the week ending December 5, the currency fully recovered during the past period, finishing it with a 2.5% appreciation and leaving its peers far behind. Diametrically opposite situation was observed in the Loonie’s index change. It had lost its past 1.2% gain by Wednesday noon and continued to depreciate during the rest of the observed period. The Aussie was another currency to spend the week on a downtrend. As a result, the Canadian and Australian dollars finished the period with a 1.9% loss.
The previous week was the most volatile in the past two months, as several currencies contributed notably to the overall turbulence. Among the most prominent occurrences, the yen’s portion of elevated volatility stood at 80%, greater even than the heightened October readings, and the Kiwi’s Volatility Index reached as high as 7.29 points. The Greenback was calmer than the market in all aspects, and its turbulence measure held below that of its peers on most occasions. The only noteworthy detail about the dollar here is that the USD/JPY elevated volatility portion was higher than the yen’s composite measure, signaling that the pair’s instability was above average for the Asian currency.
The USD significance measure spent the past week zigzagging around a downtrend line, gaining strength and losing its position on several occasions. Still, the average values of the composite and its components edged up from the previous readings. The most noticeable growth was observed in the correlation between EUR/USD and AUD/USD – its mean value increased by 0.21 points. An unusual, almost uniform distribution was observed in correlations of EUR/USD and USD/CAD, as it ranged from -0.04 to 0.75 points during the period.
The JPY Index was located well above the main baseline for the whole time period between December 10 and December 16, as the currency registered the fastest weekly advance among all majors. However, it is worth pointing out that JPY dominated its counterparts only in the end of the period, while on December 11-12 the leadership was taken by the New Zealand’s dollar. Nevertheless, the Yen added 2.03% over five trading days, with posting the fastest rise against the Loonie and Swedish Krona by 3.69% and 3.35%, respectively. Meanwhile, Canadian dollar dropped the most, losing 2.07%.
Even though it may seem that for the most part of period volatility of the Yen was rather quiet, its index was above 1.5 points almost all the time. Especially strong impetus to the turbulence index was provided on Wednesday of the previous week and Tuesday of the current week. Concerning elevated volatility indicators, the Yen posted unusually high results, because it exceed the “normal” zone during 91% in course of the December 10-16 period. Moreover, GBP/JPY currency pair was volatile in 96% of the observed time period. Elevated turbulence for all JPY currency pairs exceeded the market average of 58%, which can also be considered as rather high, compared to a number of weeks before.
It seems that the previous week was rather unusual not only in terms of high volatility and strong gains of the Yen itself, but also because of very strong correlation between different JPY crosses. At the same time, we should notice that the Yen’s composite was swinging both above and below the average level for almost equal periods of time. The short-term correlations during the period between JPY/EUR and other crosses of the Japanese currency ranged from 0.58% to 0.95%, marking very high correlation coefficients. Moreover, the 5-day values exceed 20-day ones by, on average, 0.10-0.15 points.
During the period the Europe’s common currency was mostly above the base value; however, on Thursday the currency slid below the level. The U.S. dollar, in turn, became the top performer of the period with 0.86% Index gain; moreover, the Japanese Yen added 0.85%. The Swedish currency was constantly falling during the last four days, thus finishing Thursday behind its counterparts with 1.47% loss over the base value. The most conspicuous in terms of Currency Index movement dynamics were the Japanese Yen and Swedish Krona, which both experienced several notable drops and recoveries.
Very high volatility levels were seen through the week, especially on Tuesday. The second day of the week was special not just with many events, but also with the fact that high-importance data were released in almost all regions. In Australia—monetary policy meeting minutes were released, in UK—bank stress test results and CPI data, in Euro zone—German and French flash manufacturing figures, in Canada—the manufacturing sales were measured, while in the US—building permits saw the light of day. Meanwhile, Sweden’s central bank stated that they are ready to do whatever it takes to jolt its economy out of a deflation, adding that they
As was seen in both Currency and Volatility Indexes, the single currency alone was not the catalyst of the market throughout the period, since that many data from all over world were released. The observation was well supported by the Euro significance measure, that spent the period on a very feeble level and had a very low average value. Even though, usually the correlation between the Euro pairs are relatively low, this week the components of the composite were concentrating around the zero even more and that is seen by the index falling to 0.07 at the end of the period.
