Source: Bloomberg
Author: George Lei
Although there are nearly six months from the US election day, the foreign exchange market has begun to reflect the violent foreign exchange fluctuations before and after the November 5th election.
This concern is particularly obvious in the options transactions of offshore RMB. The difference between the US dollar/offshore RMB six months and three months of ATM's implicit volatility has soared the next day.According to the data compiled by Bloomberg, the difference rose from 0.73 percentage points last Friday to 1.20 percentage points on Tuesday, the largest increase since the first release of the information in 2011.
Traders have considered a binary situation, Donald Trump's successful election, which may lead to a sharp rise in volatility, and offshore RMB has been sold on a large scale.This is the first scene of Trump's first election in 2016.
At that time, the Mexican peso was a weathervane to measure the emotions of the foreign exchange market, and Trump's election caused market volatility to surge to approaching the level of crisis.This time, the RMB may play the role of the Mexican pizza that year, which makes options traders unable to settle.
The difference between the six -month options covering the election date and the three -month option volatility expired in August show the potential impact of investors' concerns and their potential for exchange rate fluctuations.As far as the RMB is concerned, option pricing indicates that political risks seem to be high, which may be because Trump has previously levied more than 60%of tariffs on Chinese goods in the past.
Yu Xiangrong, chief Chinese economist of Citi Group, said, "The 60%tariffs promised by Trump will be discouraged -theoretically, it may squeeze all Chinese products out of the US market." He released last monthA research report said, "Under such completely decourse cases, some knee jump reactions may occur in the direction of 7.7-8.3."
Other currencies also show tension, although not so obvious.On Tuesday, the difference between the 6 -month and 3 months of the Mexican peso was 1 percentage point, which was nearly four times that of the closing level last Friday, but it was still lower than 2024.Data show that the difference between the euro 6 months and 3 months of volatility was close to 0.5 percentage points on Tuesday, the highest level since November 2021.
Trump proposed to levy a 10%tariff on all imported goods. The European Central Bank President Lagarde warned earlier this year that the European continent should be prepared for the future "potential tariffs" and "rigorous decision"Essence
Morgan Chase Global Foreign Exchange Strategy Co -Director Mera Chandan said that potential trade conflicts and tariffs continue to constitute a major risk.CHANDAN said: "In the past week, we have always suggested that tactical cuts of US dollars, but still maintain the US dollar bulls through options."
