2 for the euro/dollar rate) reveals that the increase in the perception of risk was concentrated over the shorter horizons (one to six months), while it remained more contained at the one-year horizon. Since the beginning of 2009, shorter-term expectations of exchange rate volatility have been significantly scaled down, signalling a return to ‘normal’ market conditions.
4  BIS Review 44/2009  implied volatilities (see Fig. 3), and broadly in line with their averages since 2004. Nonetheless, some tensions have emerged in the forward foreign exchange market. The US dollar funding needs have led to tensions in global money markets 3 and forced many institutions to convert euros into dollars through FX swaps.