China FX vol here to stay on.......>

EMERGING MARKETS: China FX vol here to stay on duelling trade headlines

-CNH flew overnight, rallying sharply against the greenback as markets focused

on hopeful reports that a partial deal could be struck this week to allay the

damage of further tariffs on Chinese goods. This helped underpin another rise in

CNH implied vols, with the 1m contract striking 6.7275 vol points, the highest

level since early September. Top level negotiators regroup today, keeping

markets on headline watch for the rest of the week. Markets will be watching for

any possible deal struck on FX, which reports suggest could be agreed today.

-Waves of selling pressure going through TRY markets continued into a third

session as Turkish military activities in northern Syria continue to unsettle

investors. These nerves are well reflected in USD/TRY options markets, with TRY

put volatility soaring and helping boost USD/TRY short-end risk reversals to the

highest levels since mid-July.

-South African manufacturing production data and Brazilian retail sales for

August are the data highlights Thursday, but far more attention will likely be

paid to the ongoing US-China trade talks.