Traders turn most bearish against the euro since March

Euro Bears Dominate as Currency Hits 17-Month Low and Volatility Surges

Euro Plunge Sparks Surge in Hedging and Market Volatility

Euro Hits 17-Month Low Amid Market Turmoil

LONDON, Oct 1 (Reuters) - Demand for options to hedge against another drop in the euro surged on Thursday and traders turned their most bearish on the currency since March, as the currency hit its lowest in 17 months.

European assets came under fire on Thursday, with the euro down nearly 1% to $1.1242, the lowest since May 2025, yields on bonds of more indebted euro zone economies like France and Italy trading at multi-decade highs, and stocks and credit struggling.

Options Market Signals Bearish Sentiment

Three-month euro risk reversals, which reflect the difference between the cost of an option to buy the euro against the cost of one to sell it, fell to -1.132 the lowest since March 13.

Understanding Risk Reversals

The more negative the number, the greater the cost of a sell option relative to a buy option.

Implied Volatility Surges to Multi-Month Highs

Implied volatility on euro options expiring in three months' time hit 6.45%, highest since April 13.

What Rising Implied Volatility Means

Implied vol rises when traders take out protection against the possibility of large price swings in either direction.

Comparative Moves in Other Currencies

Implied vol also increased for other currencies, such as the Swiss franc, the pound and the Australian dollar, but by far less than the euro, which saw the largest one-day rise in three-month implied vol since late January, when US President Donald Trump threatened to annex Greenland.

(Reporting by Amanda Cooper; Editing by Alun John)