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Macquarie Would Short New Spikes In USDMXN Implied Volatility

MEXICO
  • USDMXN volatility has jumped this week, with one-month implied volatility rising briefly to its highest since November last year. But given that Banxico remains cautious and in no rush to ease rapidly judging by policymakers remarks this week, Macquarie say that they would short any new spike in volatility ahead, to bet on declines in USDMXN implied vol.
  • In their view, the rally in MXN volatilities seems unwarranted and was driven by traders who were short vol in USDMXN and had anticipated little volatility until the surge in US yields. They note that these traders then had to unwind their positions and this distorted implied vols.
  • Macquarie also note that EM central banks, particularly in Latam, including Banxico, have begun to defend their currencies through verbal rhetoric. USDMXN has underperformed peers today and is currently 0.9% higher on the day, close to its highest level since late February.
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  • USDMXN volatility has jumped this week, with one-month implied volatility rising briefly to its highest since November last year. But given that Banxico remains cautious and in no rush to ease rapidly judging by policymakers remarks this week, Macquarie say that they would short any new spike in volatility ahead, to bet on declines in USDMXN implied vol.
  • In their view, the rally in MXN volatilities seems unwarranted and was driven by traders who were short vol in USDMXN and had anticipated little volatility until the surge in US yields. They note that these traders then had to unwind their positions and this distorted implied vols.
  • Macquarie also note that EM central banks, particularly in Latam, including Banxico, have begun to defend their currencies through verbal rhetoric. USDMXN has underperformed peers today and is currently 0.9% higher on the day, close to its highest level since late February.