- Risk reversals on NZD/USD hit a record low on Put demand.
- Investors continue to add bearish bets despite the recent bounce.
One-month risk reversals on NZD/USD (NZD1MRR), a gauge of calls to puts, dropped to a lifetime low of -9.175 on Wednesday, indicating record demand for the put options or bearish bets.
The gauge has dropped in a near-90 degree manner from -1.175 to -9.175 this month as investors added bets to position for a selloff in the New Zealand dollar amid fears of a coronavirus-led recession in the global economy.
The NZD/USD pair fell from 0.6448 to 0.5469 in the 11 days to March 19 and was last seen trading near 0.5825. The bounce looks unsustainable, as puts on Kiwi continue to draw bids, as indicated by risk reversals.
New Zealand's government announced national emergence early Wednesday to stem the coronavirus outbreak. Prime Minister Ardern was out on the wires soon before press time, stating that there could be several thousand cases ahead.
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