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Traders Rush for EUR at End-of-Month Fix

Traders stampede to buy euros in a bid to rebalance their portfolios on the last day of the month. This has prompted a sudden spike in the currency in forex trading. It rose to a two-week high against the dollar on Thursday’s London fix as demand surged. 

Almost $3.7 billion worth of euro futures contracts were traded in the half-hour preceding the fix. It was the highest for any comparable period since March 6.

The rise in volume followed the expiry of almost 2.1 billion euro or $2.3 billion worth of options. It was at a strike price of 1.08 for the EUR/USD pair.

Another 1 billion euros of similar options rolled off of the previous day. The common currency had weakened earlier as the European Central Bank has not made any change on interest rates. Furthermore, the ECB said it was ready to do whatever was needed to support the region’s economy.

The change of the volatility in EUR on the FX market from a month earlier also played a part in boosting volumes on Thursday. 

The fear surrounding the coronavirus pandemic caused more volatility in March. This prompted investors to start rebalancing their portfolios earlier than usual. The one-month implied volatility on the European currency on March 19 rose to the highest since 2016.

As EUR Spikes, Future Volumes in Yen Surge

Futures volumes in the yen also surged with close to 17,300 contracts or $2 billion worth of contracts. They traded in the half-hour ahead of the London fix. 

That was the most in a week and well above the average turnover in the month of April 2020. The rise coincided with the weakening of the yen, suggesting falling demand for the Japanese currency.

Japan’s Prime Minister, Shinzo Abe, indicated that the state of emergency in the country may be extended. That is while Japan enters the Golden Week holiday period. The yen fell against the dollar on Thursday by its greatest measure in two weeks.

Elsewhere in forex, the EUR stabilized against the U.S. dollar. Having rallied the day before to a two-week high on month-end flows. Moreover, there is news that the ECB will make loans to banks even cheaper.

The European currency was last up by 0.2% at $1.0979.

Much of Europe and Asia was closed on Friday for International Workers’ Day. But a new month brings a new set of worries to investors amid the COVID-19 pandemic.

The Sterling traded by 0.6% against the EUR at 87.51 pence.

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