### POV: TRADERS SEEKING PROTECTION..........>

AUSSIE: ### POV: TRADERS SEEKING PROTECTION AGAINST FURTHER AUD DECLINES

-Since the beginning of last week, options traders have increasingly sought

AUD/USD put options to hedge against a decline in spot below the $0.7203 YTD

low. Despite this, hedging costs remain close to recent averages, meaning

traders (for now) have little disincentive to protect against a further fall in

spot.

-While the 1m realised/implied volatility ratio has dipped below the YTD

average, the AUD/USD implied vol curve remains well within the recent range (and

has actually fallen over the past week for tenors beyond one month), suggesting

premium costs are yet to re-visit recent extremes and remain cost effective.

-One-month vanilla puts geared to profit on a fall below $0.7203 currently cost

~77 A$ pips, but this drops sharply to ~21 A$ pips if a 0.70 KO barrier is

added.

-Interest is beginning to build for put strikes between 0.7150 and 0.7100 over

the coming month, a trend which should extend the longer AUD remains below

$0.7453 August highs.