Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Interest in HKD trading band peaks as civil unrest resumes
Reports that China will be pressing ahead with securities laws impinging on Hong Kong's autonomy have raised the ire of Western leaders once again. Trump's administration is now said to be considering sanctions against Chinese individuals including asset and transaction freezing as a countermeasure.
Markets have responded by taking another look at the USD/HKD peg and the 7.75-7.85 trading band, with forward markets indicating HKD is coming under further stress. 1y and 2y forward points spiked to their highest levels since 1999. This has been mirrored in options markets, with implied volatility measures following suit.
Figure 1: Demand for options placed to profit from HKD testing the peg
Initially, USD/HKD calls were favoured, with 7.80 strikes in firm demand. Interestingly many trades were lodged to profit on a move above 7.85 in spot (the upper end of the HKMA's trading band) at the tail-end of last week. According to DTCC data, close to $800mln of call options crossed with strikes at 7.85 or above either as a standalone trade or one leg of a 7.75/7.85 strangle.
Please click on the following link for full analysis:
MNI FX Options Monitor - HK Unrest Re-Raises Peg Speculation (2).pdf
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.