Options Show Euro May Fall to $1.30, Bank of Tokyo's Miki Says

By Stanley White

Sept. 12 (Bloomberg) -- Currency options show the euro may decline to $1.30 by year-end, said Takeharu Miki, currency options manager at Bank of Tokyo-Mitsubishi UFJ Ltd.

The risk-reversal rate, the premium on one-month put options over call options, was near the widest since at least October 2003, showing traders are increasing bets on a decline in the euro, Tokyo-based Miki said. Puts grant the right to sell and calls allow purchases. The 15-nation currency last traded at $1.4007 at 1:49 p.m. in Tokyo after falling yesterday to a one- year low of $1.3882.

``The options market shows the euro is likely to keep heading lower and lower,'' said Miki. ``There's not much worry about a dead cat bounce. The risk-reversal rate shows the euro has the potential to fall.''


The euro's one-month 25-delta risk-reversal rate against the dollar was minus 1.1875 percent after reaching minus 1.2250 percent yesterday, the largest premium for euro puts since Bloomberg began compiling the data in October 2003. Delta measures the rate of change in an option's value relative to moves in the underlying currencies.

Volatility implied by euro-dollar options expiring in one month with a strike price near current levels rose to 12.85 percent today from 11.77 percent a week ago.

Traders quote implied volatility, a measure of expectations for future currency moves, as part of pricing options.

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net