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Risk reversals & implied vol. measures...>

CHINA YUAN
CHINA YUAN: Risk reversals & implied vol. measures mimic what we have seen in
USD/CNH spot in recent weeks; narrow ranges & muted vol. USD/CNH 1-Month
25-delta risk reversals continue to hold in +ve territory, implying a marginal
preference for USD/CNH calls vs. puts. The metric has stuck to a narrow range
over the last couple of months, after turning -ve in late '18, briefly breaching
the '17 lows in January of this year. 3-Month 25-delta risk reversals have also
stuck to a tight range, although the measure failed to move into -ve territory
in the early part of this year. Also worth highlighting that USD/CNH 3-Month
implied vol. hovers around the lowest levels observed since late '17.
- The relatively neutral outlook painted by the aforementioned metrics shows
that the market remains cautious in terms of extrapolating the recent bounce in
Chinese economic indicators as a multi-month CNH positive. The marginal
preference for USD/CNH calls shows that participants remain wary of the ongoing
U.S.-China trade talks, and perhaps view the recent run of data as a "best case
scenario" that could be set to fade as the effects of targeted stimulus measures
& the LNY holiday fade.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MarketsFixed Income BulletsForeign Exchange Bullets
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MarketsFixed Income BulletsForeign Exchange Bullets

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