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Bumper NFP Helps Push FX Options Volumes to Multi-Week High

FOREX
  • The breakout payrolls report helped underpin a surge in FX hedging volumes on Friday, with close to $120bln notional crossing via the DTCC to make for the busiest single session since Jan 17 and the flurry of HKD and JPY hedges that dominated the beginning of the year.
  • EUR/USD and USD/JPY options trade were well ahead of average on Friday, with upside interest in the USD expressed via EUR/USD puts and USD/JPY calls.
  • Sizeable trade in EUR/USD puts tilted the put/call ratio to close to 1.5 in vanilla options space, with outsized demand for 1.0800, 1.0750 and 1.0650 puts tipping the scale considerably – over $6bln notional was wagered against these strikes alone.
  • As a result, the front-end of the risk reversals curve remains under pressure, with the 3m risk reversal touching new ’24 pullback lows this morning, retreating to 0.46 points in favour of puts – although still some way to go before meeting the pre-December Fed levels of ~0.65 points.
  • Topside interest in USD/JPY was evident between Y147.50-149.00 call strikes, but was also noted as high as Y155.00 post-payrolls. JPY vols continue to see support off the late Jan lows, with preference for upside hedges helping arrest the pullback in riskies.
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