The British pound has more in common with the Colombian peso andthe Polish zloty than you may think.

The rollercoaster ride in the exchange rate over the pastweek—spurred by the latest twists and turns in the Brexitnegotiations—underscores a mounting similarity to anemerging-market currency this year, if volatility is anything to goby.

At 9%, the pound's realized swings against the dollar over thepast 12 months have outpaced all developed-market peers, accordingto data compiled by Bloomberg.

The currency is the eighth-most volatile across major emergingand advanced economies, ranking alongside exchange rates fromeastern Europe and Latin America. The only otherdeveloped-market currency in the top 10 is the New Zealand dollar,which was rocked by concern of an economic slowdown after theLabour Party unexpectedly won enough support to form a governmentin elections in October.

“The Great British Pound now trades like an emerging marketcurrency,” tweeted Jim Leaviss, head of retail fixed interest atPrudential's M&G Investments, and contributor to the popularBond Vigilantes blog.

Trading in the euro, the Canadian dollar and the Swiss franc hasbeen far calmer by comparison, with realized volatility against thegreenback over the past year at 7.5%, 7.4% and 7.1%,respectively.

British investors can take solace, however, in the fact that thepound is not likely to suffer the same vulnerability to globalshifts in sentiment as its emerging-market peers.The pound'scorrelation with an index of developing-economy exchangerates—which jumped in the Brexit-vote tumult—has tumbled over thepast year.

Sterling may be volatile, but at least it's following its ownpath.

From: Bloomberg News

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