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Taiwan Dollar Bets Surge After Worst July Since 2015
11 Aug
Summary
- Traders are increasing bullish bets on the Taiwan dollar via options.
- This shift follows the currency's worst July performance since 2015.
- Investor sentiment appears to be moving past seasonal headwinds.
Currency traders are escalating their bullish options positions on the Taiwan dollar, signaling a notable change in sentiment. This comes in the wake of the currency enduring its worst July performance since 2015. During the final two trading days of July, demand for options that profit from a stronger Taiwan dollar saw a significant increase, pushing the monthly notional volume for these contracts to nearly $8 billion.
This surge in demand for dollar-Taiwan dollar put options outstripped call options for the first time this year, according to data compiled by Bloomberg. Early August figures suggest this trend is continuing. The shift in derivatives positioning suggests that some investors are looking beyond seasonal dividend repatriation headwinds and are preparing for a potential recovery.
Factors such as official interventions supporting the Japanese yen and South Korean won, along with the Federal Reserve's rate pause, are providing a supportive environment for Taiwan's currency. Citigroup Inc. has observed increased client interest in options that benefit from the Taiwan dollar strengthening against the US dollar. Market indicators like front-end risk reversals have also turned negative, indicating a higher premium being paid for options that bet on dollar weakness against the Taiwan dollar.
