MNI China Daily Summary: Monday, July 29

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MNI: PBOC Net Injects CNY243.37 Bln via OMO Monday

MNI: PBOC Sets Yuan Parity Higher At 7.1316 Mon; -1.56% Y/Y

CHINA PBOC CONDUCTS CNY301.57 BILLION VIA 7-DAY REVERSE REPOS MON

CHINA SETS YUAN CENTRAL PARITY AT 7.1316 MON VS 7.1270

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Asia-Pac Currencies Sees Surge in Downside Hedging Interest

OPTIONS
  • Notable FX options volumes crossing so far today, with USD/CNY and USD/JPY markets seeing activity well ahead of average for this time of day. Implied vols are generally bid across G10, with front-end of the USD/JPY vol curve now erasing the late July drift to show back above 12 points.
  • Asia-Pac currencies (particularly those regionally exposed to Pelosi’s potential visit to Taiwan) are seeing an uptick in downside interest, with short-end risk reversals across both USD/CNY and USD/TWD rallying in recent sessions. USD/TWD 1m risk reversals now clear 1.50 points, rising at the fastest rate since the Russian invasion of Ukraine in February.
  • As a result, USD/CNY has seen a surge in call buying this morning, with $3.50 in calls trading for every $1 in puts so far via the DTCC. 6.85 and 7.00 calls see the majority of the interest, with over $1bln notional wagered at each strike today alone.
  • In USD/JPY, 133.00 call strikes have been a particular focus, while trade Y130 put strikes may suggest vol-hedging is a dominant theme in trade so far today. Some of the larger structures crossing on the DTCC are consistent with a sizeable 133/136 strangle trading in early US hours, as well as 129.60 straddles and a 120.10/140.45 strangle that traded in late Asia hours – both of which expire on November 1st – the day before the November FOMC rate decision.
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