Ranges constricted further this morning,...>

CHINA FX: Ranges constricted further this morning, with USD/CNY trading wholly

inside Wednesday's price as markets await further trade headlines out of either

Beijing or Washington. This hasn't stopped traders rushing to hedge risk

however, with USD/CNY options by far the most active market globally Thursday

(as has been the case all week). The put/call ratio remains heavily biased

toward USD/CNY calls, with close to $3 in calls trading for every $1 in puts so

far today.

-Bets on USD/CNY rallying north of the Cny7.00 handle picked up further, but

there's also been significant interest in call strikes rolling off between

Cny7.0880-7.1000. Mirroring this, one of the larger trades crossing today is

consistent with $500mln Cny7.10/7.50 3m call spread. The structure would break

even at approx. Cny7.1250.  These are keeping USD/CNY risk reversals supported,

with the 3m measure equalling the highest levels since early November last year.

-Short-end vols have pulled back over the past week (contracts out to 1m have

dropped, while 3m to 7y have all risen) as risk is shifted further out in the

curve to reflect the concern over a protracted US-China trade spat.