Risk reversals on NZD/USD, a gauge of calls to puts on the Kiwi, jumped to the highest level since January 2018 on Monday, indicating investors are positioning for further strength in New Zealand’s currency.
One-month risk reversals have risen to -0.475, a level last seen on Jan. 30, 2018. The gauge stood at -0.825 on July 9.
The negative number indicates the implied volatility premium for put options (bearish bets) on the NZD is higher than that for calls. So, a rise from -0.825 to -0.475 indicates the demand or premium claimed by NZD puts has dropped significantly over the last six days.
As of writing, NZD/USD is trading at 0.6735, having found acceptance above the 200-day moving average of 0.6709 on Monday.
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