May 17, 2023 03:48 GMT
1 Month Risk Reversals Rising, CNY Option Volumes Elevated
1 Month USD/CNH Risk Reversals have spiked higher in recent dealings, printing their highest level since mid March as investors look for upside protection on USD/CNH. However, 1M RR’s do remain below levels seen late in 2022 when USD/CNH was last around the 7 handle, see the chart below.
- For onshore USD/CNY we are also at multi month highs, but haven't breached the 7.00 handle yet. CNY daily option volumes on Wednesday are currently around 4 times their usual volume at this stage of the session. ~$3bn in USD/CNY options have been dealt today according to the latest DTCC data, ~$0.8bn is the average volume for this stage in the session.
- The moves in option markets come after yesterday's weaker than expected Chinese monthly activity data for April. A number of sell-side analysts have now cut their 2023 GDP growth projections for China.
Fig 1: USD/CNH vs 1 Month Risk Reversal
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