Solid hedging volumes so far with markets...>

OPTIONS: Solid hedging volumes so far with markets playing catch-up after UK &

US closures Monday. Demand for Asia-Pac hedges has propped up activity from the

off, with HKD, TWD and CNY volumes well ahead of average for this time of day.

- In contrast with the price action at the tail-end of last week, bias has

flipped in HKD to upside exposure via USD/HKD puts Tuesday. While there was

distinct demand for options that gave exposure to USD/HKD breaking above the

upper-end of the peg at 7.85 last week, this has reversed today, with a series

of large 7.61 USD/HKD put options crossing throughout the European morning

according to DTCC data. As was the case last week, the positions may not be

looking for an outright break of the peg but for an uptick of implied vols given

the relatively low premium paid for the positions.

- Reflecting more active Asia-Pac markets and quieter G10 FX, DM vols are

declining as equities recover. Upside in GBP/USD and AUD/USD spot has depressed

1m vols in those pairs by over half a point so far. AUD/USD implied now printing

close to COVID-19 crisis lows.