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VIEW: TD Securities Tweak RBNZ Call

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  • Recent volatility and weakness in Chinese equity markets has prompted distinct weakness across the CNH and CNY, with USD/CNH rallying to touch 6.5287, the highest rate since mid-April.
  • Markets are clearly conscious of the risks of further CNY weakness, with options data showing markets buying hedging products to protect against further USD/CNY strength.
  • Notional wagered against USD/CNY calls this week has countered that of puts at a ratio of 3:2, with 6.53, 6.55 and - most notably 6.60 call strikes seeing significant interest from the open on Monday.
  • Some of the largest structures crossing this week targeted end-September and end-October expiries, capturing near-term event risk and buoying front-end CNY vols, which recovered back above 4.00 points this week.
Figure 1: Options data shows Call interest clustered between 6.50 - 6.60.