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Sizeable Downside CNY Protection Props Options Activity Pre-NY

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  • So far Wednesday, currency futures volumes are generally inline with rolling averages for this time of day, with JPY, EUR, AUD futures volumes at normal levels. GBP futures saw solid volumes Tuesday (triggered by the mixed jobs released early in the session) putting daily activity around 15% ahead of average - but activity has abated Wednesday.
  • Across options markets, solid USD/CNY and AUD/USD options trade is countering quieter EUR/USD, USD/JPY markets - trades consistent with a sizeable one-month 6.8280/9280 USD/CNY call spread crossed mid-European morning, followed shortly afterwards by a longer-dated 7.10/7.20 2-month call spread.
  • Mirroring the demand for upside in USD/CNH, 3m risk reversals has been notched higher, rising to touch 0.9 points for the first time since mid-April to match the rise above 7.00 in spot. Moves follow further downgrades for China's growth outlook today, as Nomura cut 2023, 2024 growth forecasts by 0.4ppts and 0.2ppts respectively.

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