- AUD/USD risk reversals hit 3.5-month lows on Monday.
- Investors likely buying puts in anticipation of RBA rate cut.
AUD/USD one-month 25 delta risk reversals (AUD1MRR) have dropped to 3.5-month lows, indicating investors are adding bets to position for weakness in the Australian Dollar amid widespread speculation that the Reserve Bank of Australia will on Tuesday cut interest rates for the first time since August 2016.
The risk reversals are currently trading at -0.95 in favor of puts (bearish bets), the lowest level since Jan. 25. It is worth noting that the gauge of puts to calls was trading at -0.60 on April 18.
The slide represents the spike in demand or the implied volatility premium for AUD puts.
AUD1MRR
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