One-month 25-delta risk-reversals have moved from 0.25% in favor of euro calls to 0.3% in favor of euro puts since the start of the month. Mark Stafford, foreign exchange options trader at Deutsche Bank in London, said, "The market is worried about the euro depreciating against the dollar. This has been driven by recent U.S. economic data exceeding expectations."
One-month euro/dollar implied vols have recently risen back to 9.7% having dipped from 9.6% two weeks ago. The euro has fallen against the dollar to USD1.10 from USD1.14 at the beginning of the month. Traders said there was demand for both short and long-dated euro puts versus both the dollar and the yen from a broad mix of investors.
Stafford added that sentiment on the euro has changed over the course of the month. In early August, the market was focused on concerns over the current account deficit in the U.S., but recent positive economic data has eased concerns. In contrast, European data continues to be weak, with poor second-quarter gross-domestic product growth reported in France and Germany last week.
EUR/USD Spot & One-Month 25-Delta Risk Reversals