Analysts at Citi outline a scenarios where FX volatility rises. Yeah, I hope they're right!
(Hope being the 4 letter word in the headline)
Citi's reasoning (in very brief) goes along the lines:
- If the USD falls, European investors may move quickly to hedge their foreign-bond holdings
- which would accelerate USD losses
- thereby triggering FX market volatility higher
All hinges on a falling USD.