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The recent policy tweak from the PBoC (raising the FX RRR by 2ppts) understandably helped spur higher-than-average hedging volumes in USD/CNY, according to FX options data. Although the PBoC's suspected policy intention was to slow the USD/CNY decline, options buyers have instead favoured downside protection (CNY calls), post announcement.

  • Since the statement on Monday morning, the DTCC has tracked close to $7bln in USD/CNY options trades, the bulk of which have been USD/CNY puts (with an average strike of 6.3845). USD/CNY put strikes at 6.25 and 6.30 have also garnered significant focus, with close to $1.5bln in notional trading across both strikes.
  • Among the larger trades, some of the most popular strategies were downside bets, with a 6.05/6.25 one-year put spread among them. The trade breaks even on a move below 6.23 in spot, which would mark the lowest print since 2015's devaluation.

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