Option Traders Aren't Buying the Yuan's Latest Pullback

The last time the yuan retreated like this, options traders piled into short bets against the currency. This time, they’re sticking to the sidelines.

The yuan’s three-month risk reversal -- a measure of puts over calls -- has dropped to near its lowest level in more than three years, even with the spot down 2.8 percent from a peak reached Sept. 8. That’s a far cry from the end of 2016, when a selloff in the yuan spurred the risk reversal to triple.

Burnt by suspected central bank intervention before, traders may be wary of betting against a sustained slump in the yuan, especially before the Communist Party Congress next month.

“No one dares to short the yuan,” Kenix Lai, a currency analyst at Bank of East Asia Ltd. in Hong Kong. “They think China could use stronger fixings and intervention to slow the declines before the Party Congress.”

— With assistance by Tian Chen

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