Dollar Weakness Fuels Unusual Surge in Currency Volatility

The dollar’s descent is elevating the price of hedging currency trades around the world, breaking up a long-standing market conviction that costs tend to come down when the greenback weakens.

The correlation between the dollar and a widely-watched gauge of volatility in Group-of-10 currencies fell to the lowest level in seven years this week. For most of the past 15 years that correlation was positive.