Lehman Brothers, believing that the Australian dollar has bottomed out, is recommending an fx options strategy to take advantage of Aussie upside against the mighty greenback. Ron Leven, currency strategist in Tokyo, said the Aussie dollar is forming a base around USD0.50 and has the potential to reach USD0.53 in the near future. Leven suggests buying a three-month at-the-money Aussie dollar call with a knock-out placed at USD0.49 and selling a three-month Aussie dollar call struck at USD0.53, at an approximate cost of 70 bps. On Wednesday, the Aussie stood at USD0.5027.
The three-month window was selected because in the latter part of the summer a number of Australian dollar denominated bonds mature, Leven explained.