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Uptick in CNY Vols Drives Hedging Demand

OPTIONS
  • Following the acute uptick in overnight CNY vol, hedges are in firm demand, with both Asia hours and early Europe seeing interest in large options structures. Today's put/call ratio for USD/CNY at 1.23 and interest in ITM 7.25, 7.30 and 7.32 put strikes shows that the options markets aren't positioning for a one-way incline for the pair, despite signs the Chinese authorities may be more flexible in their currency approach (See CNH post above).
  • Busier CNY hedging contrasts with quieter EUR and JPY options markets so far Friday, but GBP/USD interest has picked up alongside the weakness in spot. A large 1.25 put traded in Asia-Pac hours, with a notional of just under £200mln to target an Apr 12th expiry - capturing the period just before the next CPI release on April 17th - and helps characterise the interest in GBP downside so far today (1.2600 and 1.2450 put strikes also draw focus).
  • EUR/USD spot weakness has put prices within range of more sizeable strikes layered between 1.0825-75 and capturing Friday's fix: (over $5.5bln across these strikes) and could contain price action into the Friday close.
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