Currency traders focus on Australian dollar and euro for bearish US dollar bets

Options traders are using currencies such as the Australian dollar and euro to express bearish US dollar views after recent disappointing American economic data.  

The Aussie is being supported by the Reserve Bank of Australia’s “cautious and gradual” stance on easing, as well as improving risk sentiment. The euro’s allure has grown from expectations an increase in regional defence spending will support the eurozone economy, and a more hawkish-sounding European Central Bank. Meanwhile, things look rockier for the US dollar as data showed jobs growth missed expectations in July with downward revisions to prior months as well.

Standard Chartered Bank has seen “a lot of interest” in euro-US dollar and Australian dollar-US dollar call options after non-farm payrolls, according to Saurabh Tandon, global head of foreign-exchange options in Singapore. The market is now “focusing on upcoming events” such as US inflation and the Federal Reserve’s Jackson Hole symposium, he said.

The rise in bullish Aussie and euro options signals growing conviction that the US dollar will weaken further, while also showing that traders are becoming more selective in positioning amid tariff risks and deteriorating data from the world’s biggest economy. Some investors had begun to turn bullish on the US dollar as countries started to make trade deals with the US, and this signals a reversal of that momentum. 

“Following the EU-US trade deal announcement, we saw directional demand for dollars via options, but that theme was quickly snubbed by the negative non-farm payroll revisions,” said Jamie Sanders, director of foreign-exchange options trading at RBC Capital Markets in London. 

The trading volume of Australian dollar call options expiring by September, which gain in value if the currency rises versus the greenback, was triple that of bearish put options on Aug 7, data from CME Group’s options central limit order book showed. Euro call option volume was 77 per cent larger than that of puts that same day. 

National Australia Bank has seen a pickup in demand for bullish Australian dollar option wagers, as well as for those on the New Zealand dollar. 

“Following the recent non-farm payrolls, we’ve observed significant activity in AUD/USD and NZD/USD short-dated call options, in anticipation of a busy data week, including the US CPI release and the RBA meeting.” said Con Davelis, Sydney-based head of FX options at the bank.  BLOOMBERG