Increased fears of terror attacks after the hostage killings in Saudi Arabia has led market players to purchase options on the U.S. dollar and Swiss franc currency pair, traditionally seen as a 'safe haven'. The weight of the option buying caused one-month implied volatility to jump last week to 12.37% on Wednesday from 11.35% the Friday before. Dollar/Swiss slipped slightly to CHF1.249 on Thursday, down from CHF1.255 the previous Friday.
"I think we'll see this move [in the options market] filter through to the spot market," noted an options trader at a French bank in London. "It will likely impact euro/Swiss too," he added. "There is good demand for dollar puts with strikes at USD1.20 and USD1.22," said another trader. The maturities of the puts varied from one-month to one-year, he added.
Although the perception of the Swiss franc as a safe haven has contributed to its strengthening against the dollar, the spot market has been driven by dollar weakness, noted Ian Stannard, currency analyst at BNP Paribas in London. "The dollar's weakness is connected to rising oil prices and fears of the impact on growth. The market has been looking at consumer surveys which are still coming in on the weaker side," added Stannard.
