USD/CAD jumps to five-month high, value of CAD puts (bearish bets) jumps

• The USD/CAD jumped to 1.3117 – the highest since June 28.
• The value of CAD put options hits one-month high, indicating rising demand for the bearish bets.  

The USD/CAD is currently trading at 1.3305, having clocked a five-month high of 1.3317 in the overnight trade. Notably, the currency pair is up 4 percent compared to the low of 1.2782 seen on Oct. 1.

The rally is likely associated with the 31 percent slide in WTI oil prices witnessed in the last 7 weeks. Further, Canada’s heavy-oil benchmark – Western Canadian Select – fell to a record low of $13.46 last week, adding to the bearish pressure around the CAD.

More importantly, the sell-off in the Canadian dollar may not be over just yet, according to options market data.

The USD/CAD one-month 25 delta risk reversals (CAD1MRR) are currently trading in favor of CAD puts at 0.125 – the highest level since Oct. 22. Notably, the risk reversals have gone up from 0.05 to 0.125 in the last two days, which indicates the growing demand for the CAD puts (bearish bets).

CAD1MRR