We’re again witnessing a divergence in volatility between FX and other markets as events in the Ukraine take on a new dimension. On equities, the VIX (measure of expected future volatility) has spiked to 3 month highs. A similar measure for FX (CVIX from DB) has declined to new lows for the year. Why is FX so sanguine about it all? Three reasons. Firstly, in case you had not noticed, the old “risk on, risk off” dynamics are a thing of the past, having been ditched well over a year ago. Secondly, safe haven dynamics are also more muted. The yen is not the safe haven it once was, the CHF remains constrained by the EURCHF floor and right now the scope of events are not seen as sufficient to cause a rush for the exits in riskier assets (in favour of the more liquid dollar). Finally, what ultimately matters for FX is the policy reaction (i.e. are there implications for interest rates) and for now, this continues to favour other currencies, rather than the dollar.