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Demand for USD/CNY Upside Adds to Pressure on the Currency

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  • Following an understandably subdued series of sessions for FX hedging markets, volumes are showing busier trade earlier Tuesday, with EUR/USD and USD/CNY activity higher-than-average for this time of day.
  • USD/CNY markets are holding up well, with demand for calls adding to the recent theme of concern around CNY weakness. Bloomberg wrote earlier today that some participants had been blocked from entering into specific CNY swap trades – implying that demand for USD/CNY to trade outside of trading band is building – compounding the pressure on the currency – although the piece adds that upcoming market holidays are a complicating factor for the trades.
  • Elsewhere, EUR/USD hedging markets are led by demand for downside exposure, with decent notional wagered against 1.0600, 1.0650 and 1.0700 put strikes tipping today’s put/call ratio to ~3:2.
  • Demand for EUR/USD downside may be picking up on the back of yesterday's USD move, as well as the further retreat for Fed rate cut pricing across 2024 - squeezing the current USD short position.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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