FX options wrap - euro direction, JPY hedges, month-end, CNH
The USD is broadly higher on Wednesday and has supported most G10 FX option implied volatility curves. Month-end FX hedge rebalancing flows can add to volatility - models signal a mild need to sell the USD and buy EUR for June.
Implied volatility in euro options expiring after the French election is well supported and euro puts retain a substantial premium to EUR calls since the election was announced, albeit now off their highs. Outright flows continue to favour broader EUR volatility and a weaker EUR over time.
Despite USD/JPY making a new multi-decade high above the April 29 peak at 160.24, FX options have appeared far less concerned with official action this time around. Implied volatility was only marginally higher andits JPY call over put premium via 1-month risk reversals was actually probing new long term lows below 0.5 (was 1.9 in late April). There has been, however, demand for longer dated expiry downside strikes.
The USD/JPY gains took USD/CNH above 7.3000 - lifting 1-week and 1-month expiry implied volatility to 3.5.
USD/ZAR implied volatility and its topside strike premiums have almost returned to pre election levels and signal expectations of calmer climes in its wake.
For more click on FXBUZ
USD/JPY 1-month expiry 25 delta risk reversals https://tmsnrt.rs/3VEpmp8
USD/JPY 1-month expiry FXO implied volatility https://tmsnrt.rs/3L0qDBO
EUR/USD 25 DELTA RISK REVERSALS https://tmsnrt.rs/3XDE5TE
(Richard Pace is a Reuters market analyst. The views expressed are his own)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
