Traders are seeking alternatives to the euro when shorting the US dollar as they look to capitalise on expectations for further weakness in the currency.
Dollar-yuan option trading volume on the Depository Trust & Clearing climbed to a one-month high last week, with investors paying a premium to speculate on downside moves in the pair versus upside ones. Volumes in Australian dollar call options, which gain if the currency rises against the US dollar, were nine times greater than puts, data from the Chicago Mercantile Exchange Group’s central limit order book showed on July 1.
“The most recent demand in FX options has been a play in USD/CNH lower via dollar put digitals,” as well as other downside option structures, said Mukund Daga, head of foreign-exchange options for Asia at Barclays Bank in Singapore. “This has been on the back of the most recent truce pact that US President Donald Trump has signed with China,” he said.
A put digital option refers to a strategy that offers a fixed payout if the currency pair falls below a predetermined level when it expires.
There’s also an increased interest in bullish option structures for the Korean won, Daga said.
