Has Currency Volatility Bottomed?

With the major currencies making new 1-year lows against the USD, and with the GaveKal FX Volatility Index at two standard deviations below the long-term mean, we wonder if currency volatility has bottomed. A close look at our volatility index suggests it has begun to turn up (1st chart) and this change in trend is confirmed with the Deutsche Bank FX Volatility Index turning up too (2nd chart). The tight correlation in recent years between our currency volatility index and the VIX suggests any uptick in FX volatility will likely be accompanied by a pickup in stock market volatility (3rd chart below).