NZD/USD hedging volumes sit well ahead of...>

OPTIONS: NZD/USD hedging volumes sit well ahead of average for this time of day,

with the RBNZ decision overnight the catalyst, and the subsequent rally in NZD

(which is now holding its eighth consecutive session of gains). DTCC data shows

NZD/USD call options are firmly in demand, with strikes at $0.6640, $0.6700 and

$0.6740 in favour. Volatility trades have also crossed, with one of the larger

deals trading consistent with a N$52mln $0.6660 two-week straddle.

-Reversing much of the trend seen at the beginning of the week, implied vols

across DMFX are generally falling, with the EUR/USD 1m measure snapping four

sessions of gains to fall back below 5.5 points, leaving the EUR/USD vol term

structure far flatter than it was this time last week. The moves in vols are

mirrored in volumes so far Wednesday, with total EUR/USD options notional well

below recent averages.

-USD/CNY options markets are busier, with USD/CNY calls favoured over puts. Some

of the more interesting trades include a $300mln 7.15/7.30 call spread rolling

off on September 12th this year. The structure breaks even at around 7.1580.