The one-month 25 delta risk reversals (AUD1MRR) on the Aussie dollar, a gauge of calls to puts on the Australian currency, has hit the highest level since Dec. 19, indicating investors are unwinding bearish bets on the AUD.
The gauge is currently trading at -0.825. The negative number indicates that the implied volatility premium or demand for put options (bearish bets) is higher than that for calls (bullish bets).
The demand for bearish bets, however, has weakened significantly in the last few weeks. This is evident from the fact that risk reversals stood at stood at -1.0 on Jan. 22 and -1.15 on Jan. 3.
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