Echoing futures volumes, current hedging....>

OPTIONS: Echoing futures volumes, current hedging activity has been acutely high

Friday, with total options volumes close to double recent averages for this time

of day. Asia-Pac FX hedging has been particularly rampant, with JPY, CNY, KRW

and TWD trades a particular focus.

-Vol curves are almost uniformly higher across global currency markets today,

with the most notable premiums added to USD/TWD and USD/CNY short-end contracts.

While the term structure for USD/CNY, for example, has been well bid Friday,

it's yet to challenge the better levels seen earlier in July and remains lower

and flatter across almost every maturity. This pattern is echoed across JPY

markets, with 1m USD/JPY implieds still short of the levels seen in early June.

-Regional tensions between Japan and South Korea compounded the downside in

regional Asia-Pac currencies, helping USD/KRW to near 30-month highs. This

helped fuel demand for further downside KRW protection via 1,196.65 and 1,217.45

calls, although one of the more notable trades was consistent with a $250/200mln

1,167/1,181 1m put spread, a position that breaks even on a move below around

1,180.