John At The Center

Options traders are more bullish on the yuan than any other currency as they bet that growing exports and accelerating inflation will overcome China’s vows to maintain a 20-month dollar peg.

The premium charged for the right to buy yuan in three months over contracts to sell has more than tripled this year to the most among 44 currency options tracked by Bloomberg. The 2 percentage point difference is the most since China last ended a fixed-exchange rate in July 2005, so-called risk-reversal rates show. Expectations for price swings also have tripled in the fastest implied volatility rise among the currencies.

via Yuan Options Most Expensive as China Pledges No Rise (Update1) – BusinessWeek.