April 11, 2018 / 1:41 PM / 2 months ago

Russian rouble implied volatility soars on escalating market stress

LONDON, April 11 (Reuters) - Short-dated options in the Russian rouble jumped to multi-year highs on Wednesday as punitive new U.S. sanctions and the escalating tensions over the conflict in Syria intensified a selloff in the currency.

Investors have stampeded out of the country's stocks and currency and have increasingly turned to the complex foreign exchange derivative markets to salvage the value of their investments after the United States imposed new sanctions against Moscow on April 6.

In spot markets the rouble has fallen around 10 percent this week to the dollar.

On options markets, One-month implied volatility in the rouble, a gauge of short-term expected swings in a currency, surged to the highest since late-June 2016 amid signs of increasing pressure on the market at least in the short-term.

Such is the nervousness around the currency's outlook that the spread between short-dated and medium-tenor implied volatility inverted to its steepest levels in nearly 3 years.

That is a clear indication thatr foreign exchange markets see more pain in store for the rouble in the short-term

One-month vol is trading around 20 while three-month vol is around 16.5, Thomson Reuters data shows.

Broad investor positioning in the Russian currency has swelled in recent years as overseas investors were attracted by its relatively high yields, low volatility and rising oil prices.

Reporting by Saikat Chatterjee and Sujata Rao;

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