After a decent start to the European........>

OPTIONS: After a decent start to the European session, currency hedging volumes

have flagged slightly over the NY crossover, with quieter USD/JPY and AUD/USD

markets undermining more active volumes in EUR/USD, EUR/GBP and USD/CHF.

-DMFX implied vols are inching higher in the short-end, most notably in EUR

crosses as the overnight contract touches the highest levels since the November

US mid-term elections last year. The move in overnight vols has blown out the

breakeven on an overnight straddle to around 57 pips, over twice that of the 24

pips for the equivalent contract yesterday.

-After a protracted quiet period, USD/CNY options volumes are faring much better

today, thanks to some large volatility hedges crossing in late Asia including a

$200mln 6.5150/7.5563 one year strangle. Put strikes have been in demand layered

between 6.70-6.80, although there has also been interest in 7.10 call strikes.

-USD/JPY spot has traded very range-bound today as markets heed the $4.2bln

option rolling off at Y108. That may remain the case up to the BoJ decision next

week, with over $5bln in expiries rolling off between Y107.50-108 between now

and Friday's NY cut.