Volatility in the foreign-exchange market will stay near quarter-century lows this summer before a potentiallate-year “shock,” according to Deutsche Bank AG's Alan Ruskin.

“The market is extremely complacent, and we will get some sortof shock, probably in quarter four,” Ruskin, global head ofDeutsche Bank's Group of 10 foreign exchange, said in an interviewon Bloomberg Radio's “Surveillance” with Tom Keene and MichaelMcKee. “We'll see the kind of employment numbers, particularly thedecline in the employment rate well below 6 percent, that are goingto trigger a reconfiguration in terms of rate expectations.”

Implied volatility and realized volatility are at 25-year lows,Ruskin said, as investors gauge the Federal Reserve's pace ofraising borrowing costs from the all-time low they have been atsince 2008.

“The Fed is slowly approaching a tightening cycle from a pointin which it's been historically extraordinarily accommodative andwhere it has been distorting the price of money,” Ruskin said.“It's probably best to keep one's powder dry and wait for thatopportunity in two or three months.”

The best prospects for profit will come in shorting the frontend of the curve—Treasury bills and notes with maturities less thanfive years—with the Fed increasing interest rates as soon as thesecond quarter of 2015 on jobs growth, Ruskin said. A short is abet that prices will drop.

“The fact that the Fed will have to respond at some juncturemeans that, eventually, those shorts are going to make money,”Ruskin said.

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