Political ire and protests in Hong Kong...>

HONG KONG: Political ire and protests in Hong Kong took a lot of focus across

the Asia-Pac session and that remains the case in early Europe with the HKD

holding close to the best levels of the year against the USD after touching

7.8162. The shoot higher in the HKD follows the squeeze in interbank funding

costs, with the Hibor 1m rate hitting the highest levels since 2008 overnight.

While some wires are pinning the move on a seasonal demand for cash, it's likely

the squeeze in funding costs may follow raised concern of capital outflow from

Hong Kong prompted by political tensions.

-Either way, USD/HKD options markets have seen turnover over 4 times above

average for this time of day. The put/call ratio edges slightly in favour of

USD/HKD puts, with 7.75, 7.7850 and 7.80 strikes in focus. Interestingly, the

move higher in HKD has failed to deter options trades eyeing a weaker HKD. Over

$850mln notional has been waged on options with strikes at 7.85 or above so far

today. Volatility bets have also been popular, with a $200mln 7.8163 one-year

straddle crossing in early European hours.