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Given the risk-off moves seen across equities, commodities and rates this morning, no surprise to see currency hedging volumes well ahead of average for this time of day, led by JPY, EUR and CAD options activity. No surprise to see implied vol for calls across haven currencies has surged:

  • USD/JPY 3m risk reversals have slipped to their lowest levels since November last year (when lockdown concerns were again spiralling across Europe)
  • Solid demand for JPY vol hedges has been seen across European hours, with sizeable trade in 111.70/115.50 strangles a focus, with an end-January expiry eyed.
  • Mirroring the strength in EUR spot, the front-end of the EUR risk reversals curve has corrected higher, allowing the 3m contract to recover off mid-November lows of -0.7 points. Move coincides with the sharp pullback in the front-end of the US yield curve this morning, with the 2y off 13bps at typing.