### POV: HKD BETTING ON A BREAK? -Once....>

HONG KONG: ### POV: HKD BETTING ON A BREAK?

-Once every few months, USD/HKD becomes the focus of options markets as the pair

tests the highest levels of the HK$7.75-7.85 HKMA band. That's been the case

this week with an uptick noted in trades taking positions that would profit from

a break of the peg. Particular interest has been paid to a 1-year $250mln 8.00

call strike that traded Monday, paying a $225,000 premium for the privilege.

-The trade follows the HKMA's first intervention in currency markets since

August of 2018 (which, back then, was the first since 2005) on Friday last week,

an action that's been repeated again overnight.

-Despite the HKMA's actions, more options trades crossed that favour a weaker

HKD, with a further $2bln in 7.85 calls trading in Asia-Pac/early European

hours, as well as $300mln in calls with strikes north of the peg. The trades

comfortably mark the highest USD/HKD call option volume of 2019 and the total

notional sits well above the levels seen last time the HKMA intervened.

-But, with HKMA reserves still strong, these trades will likely remain mere

volatility bets for now.