• AUD/USD FX options have increased the cost of volatility protection over recent sessions

• Implied volatility which gauges those risks when setting premium trades its highest levels since July

• Risk reversal options are a volatility play with a directional bias - they have seen a big increase too

• 1-3-month expiry 25 delta risk reversals demand the highest downside over upside strike premium since June

• The post RBA drop below 0.7000 fuels demand for volatility and downside protection

• Similar price action across G10 FX shows a market wary of more USD gains/risk aversion as US data risks loom

• Related - FX options wrap — Dollar hedging demand builds on Iran, data risks
AUD/USD FXO implied volatility


AUD/USD 25 delta risk reversals

(Richard Pace is a Reuters market analyst. The views expressed are his own)