Halister News

(Bloomberg) -- Investors are tentatively adding back bearish yuan bets after being hurt on such positions earlier in the year, according to Societe Generale’s Asia Pacific head of flow strategy and solutions.

• Exposure is much smaller this time; yuan depreciation will likely be gradual and market volatility limited for rest of year, Andrew Scott said in interview this week
• Forward points and implied volatility have collapsed across maturity buckets
• Investors are expressing risk via call spreads, so they can capture the trend if USD/CNH moves higher but aren’t exposed to move in other direction
• To partially fund call-spread strategies, clients can sell downside strikes, especially in and around 6.40 & 6.30
• NOTE: USD/CNH up 0.05% to 6.5617 vs this year’s high at 6.7618 on Jan. 7
• Offshore yuan rose 3%, from 6.7618 to 6.5604 vs dollar, in space of one week in Jan. as PBOC squeezed bears by mopping up liquidity
• NOTE: CNH 12-month forward points have fallen from 3,900 in Jan. to 1,629 today; USD/CNH 1-mo. implied vol down from as high as 10.23% in Feb. to 4.19% today
• NOTE: Yuan Bears Once Compared to Soros in His Prime Now Look Subdued