Free Trial

### POV: HEAVY USD/CNY CALL BUYING SHOWS...>

CHINA FX
CHINA FX: ### POV: HEAVY USD/CNY CALL BUYING SHOWS MARKET COGNIZANT OF RISKS
-Currency hedging markets upped the ante on the Chinese authorities this week,
evident in the surge in demand for USD/CNY calls over the past few sessions.
Options markets bought close to twice as many calls than puts this week (a
pattern consistent in each of the past five sessions).
-Despite the uptick in realised volatility, hedging costs remain relatively low
compared to recent months. USD/CNY 3m calls positioned to benefit on a break of
Cny7.00 cost just under 170 USD pips at writing, breaking even at approx.
Cny7.08. To trim the up front cost and bring the break even point lower, adding
a Cny7.20 knock-out barrier cuts the premium to approx. 40 USD pips to break
even at Cny7.0140.
-This follows MNI reporting that Chinese authorities have begun to indicate that
they may allow USD/CNY to break through their implied tolerance band of Cny7.00.
In the subsequent sessions, USD/CNH has rallied to touch multi-year highs, with
markets eyeing early-Jan 2017's best levels of Cnh6.9895.

To read the full story

Close

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.