Fluctuations in currency exchange rates will increase next year growth rates differ

Fluctuations in currency exchange rates will increase next year growth rates differ, central bankers try to sustain the recovery and European leaders battle a sovereign debt crisis, according to UBS AG.

Annual price fluctuations in the exchange rate can double in some major currencies, UBS strategists predicted the currency trader world's second largest. The euro may vary between $ 1.1 and $ 1.5, compared with $ 1.1877 to $ 1.4579 so far this year, and the U.S. dollar you can play as low as 70 yen to 100 yen in 2011, twice the range 80.22-94.99 current year, the company said.

"The divergence between the strength in emerging markets and unusual levels of uncertainty in major world economies will make this super volatility," Mansoor Mohi-Uddin, the Singapore-based head of global currency strategy at UBS, said in a telephone interview. "There is also a high risk of error in policy decisions regarding interest rates, quantitative easing and fiscal adjustment."

UBS, the largest currency trader after Deutsche Bank AG, said the companies should increase the protection against further fluctuations in exchange rates. Corporations in the U.S., Japan and Europe have increased the percentage of projected revenues protected against fluctuations in exchange rates to a record, the latest quarterly survey of customers of JPMorgan Chase & Co. on 1 October showed.

Standard Chartered Plc, the most accurate currency strategists said the euro's weakness will extend into next year as the crisis of sovereign debt in the region undermines economic growth.

Fed Speculation

Standard Chartered, the forecaster superior general of the six quarters ended September 30 ,predicted that the euro may weaken to less than $ 1.20 in mid-2011 from about $ 1.3252 today.

Just last month, the euro reached $ 1.4282, the strongest level since January, as traders sold the dollar on speculation the Federal Reserve lowers the dollar by printing more money to purchase $ 600,000 million of Treasury bonds called quantitative easing. The Fed started buying those last month.

The implied volatility of options for major exchange rates averaged 12.34 percent this year compared with an average of 10.6 percent since January 2000, according to JPMorgan Chase & Co. data. The bank index options three months of 2010 hit its high of 16.95 percent in May and was at 12.49 today.

"In general, investors will become more aware of the risk in 2011," said Mohi-uddin. "For over several years at least, volatility will be structurally higher."