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Protection Against a Dollar Plunge Is Costliest Since 2009

Options market reflects bearish sentiment on the U.S. currency.

By Lananh Nguyen and Robert Fullem, Bloomberg | Updated on July 25, 2017

Nervous currency traders are paying the most in eight years for insurance against a plunge in the dollar.

With the Federal Reserve expected to hold interest rates steady Wednesday, traders in the $5.1-trillion-a-day currency market are paying an added premium for the first time since October 2009 on options to protect against an extreme decline in the dollar against the euro over a six-month tenor. One measure, known as a 10-delta risk reversal, is an indication of trader bias in the options market, which currently reflects expectations that any move in the euro would be dramatic.

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