By Saqib Iqbal Ahmed, Carolina Mandl and Dhara Ranasinghe
NEW YORK/LONDON (Reuters) -Trading in tumultuous foreign exchange markets is akin to being in a casino right now, according to some traders navigating markets that have been whipsawed as central banks and governments try to right their economies.
In the last week, sleep-deprived traders have worked flat-out advising clients on the markets' extraordinary moves: the crash of Britain's pound to an all-time low, the Japanese monetary intervention to prop up the falling yen, and the euro's deeper plunge below dollar parity.
Towering above all is the mighty U.S. dollar which is trading at a two-decade peak. Some see no end to the wrenching volatility.
"It really is like a casino right now," said John Doyle, vice president of dealing and trading at Monex USA, who said he is being more hands-on in talking to clients and extra cautious about risk.
"We have had to be extra vigilant of our internal trading policies to ensure we are not taking any undue risks," said Doyle. "Discipline has been key."
Deutsche Bank's Currency Volatility Index – the historical volatility index of the major G7 currencies - jumped to a two-and-a-half year high of 13.55 on Monday.
The British pound fell about 5% against the dollar over the last two sessions, its worst 2-session drop since March 2020, drawing comparisons with the typically more volatile emerging market currencies. The yen remains near a 24-year low against the greenback, despite Japanese monetary authorities last week intervening in the foreign exchange markets to boost the battered currency for the first time since 1998. While Sterling and the yen have fared extremely poorly against the dollar, the greenback's meteoric rise has spared no major currency. Every G10 currency has slipped against the dollar this year, for an average fall of about 16%.
"It's been a hectic few days for sure, and sleep has been sorely lacking," said Michael Brown, head of market intelligence at payments firm Caxton in London. "I'll blame sterling rather than my coffee habit for that, but heading to bed at 11:30 and waking at around 3:30 to cable (the US-Sterling rate) hitting record lows certainly wasn't much fun."
Moves have surprised long-time currency traders and investors.
Akshay Kamboj, co-chief investment officer at Crawford Ventures, a hedge fund trading currencies said while he had been expecting a deep correction in sterling "this deep was not anticipated."