Derivs - FX

As legislators from the House and Senate head into conference Thursday morning to nail down the details of financial reform, experts say this final step before the bill becomes law could bring some surprises like a strengthened Volcker Rule and tiny tweaks of language that would have a significant impact on the industry.

Credit Suisse is marketing three-year notes for institutional investors who are bearish on the long-term prospects of the U.S. dollar. The notes are linked to an equally weighted basket of BRIC currencies comprising the Brazilian real, the Russian ruble, the Indian rupee and the Chinese yuan.

Sterling gained ground on the euro this week amid expectation Prudential has to unwind its currency hedges bought against the entire USD23billion cash component of the deal to purchase AIG’s Asian arm, AIA, which has now collapsed.

Martyn Harrison, a director in fx options trading at Crédit Agricole CIB in London, has left the firm, less than six months after joining.

Standard Chartered has hired Robert Waugh to head up its pensions and insurance asset liability management business out of Hong Kong.

Mizuho Securities Asia has hired Yin Wu as head of fixed income and derivatives sales, a new role for the firm.

Credit Suisse is making a concerted push to boost sales in its China fixed income derivatives team, hoping to target sales in longer dated fx transactions, an area which lacks volume and liquidity.

If the U.S. financial reform legislation successfully pushes many over-the-counter derivatives onto exchanges, banks and dealers could see a tax break on those deals of up to 12%, lawyers say.

Correlation across asset classes has rocketed as disparate markets react to sovereign debt problems. The move has some arguing derivative book hedges are going to need to be radically re-hedged somehow. But there is also a camp that sees the spike as short-term background noise that can be ignored.

Hedge funds have been rushing to buy one-week put options on the euro against the U.S. dollar over the last few days to mitigate losses arising from a slew of three to six-month one touch options expiring Monday that traders expect to finish out-of-the-money.

Corporate hedgers and hedge funds with bearish views continued buying risk reversals for downside protection on the euro/U.S. dollar this week, despite intraday increases in spot and decreasing volatility on the pair.

Barclays Capital continued the expansion of its U.S. fx sales team in New York this week with the hires of Mike Testa as head of real money fx sales for the Americas and Marlena Demenus as a director in sales focusing on banks and commodity trading advisors, with plans for additional hires throughout the year.