Brexit-Battered Pound as Volatile as Emerging-Market Currencies
(Bloomberg) -- The British pound has more in common with the Colombian peso and the Polish zloty than you may think.
At 9 percent, the pound’s realized swings against the dollar over the past 12 months have outpaced all developed-market peers, according to data compiled by Bloomberg.
The currency is the eighth-most volatile across major emerging and advanced economies, ranking alongside exchange rates from eastern Europe and Latin America. The only other developed-market currency in the top 10 is the New Zealand dollar, which was rocked by concern of an economic slowdown after the Labour Party unexpectedly won enough support to form a government in elections in October.
Trading in the euro, the Canadian dollar, and Swiss Franc has been far calmer by comparison, with realized volatility against the greenback over the past year at 7.5 percent, 7.4 percent and 7.1 percent, respectively.
British investors can take solace, however, in the fact that the pound is not likely to suffer the same vulnerability to global shifts in sentiment as its emerging-market peers. The pound’s correlation with an index of developing-economy exchange rates -- which jumped in the Brexit-vote tumult -- has tumbled over the past year.
Sterling may be volatile, but at least it’s following its own path.
©2017 Bloomberg L.P.