Market News

(Bloomberg) -- In one of the busiest days in history for Swiss franc options, traders bet big that the currency will extend its recent losses.

A total notional of €4.6 billion ($5 billion) traded in euro-franc options on Monday, the third largest on record, data from the Depository Trust & Clearing Corporation show. And almost 90% of the total exposure showed bets on a weaker Swiss currency.

The franc traded at 0.9631 per euro as of 7:42 a.m. in London, near an eight-month low hit Friday. The currency remains under pressure as the Swiss National Bank is expected to cut interest rates on Thursday, while German lawmakers will vote on a bill later Tuesday to unlock hundreds of billions of euros in debt-financed defense and infrastructure spending.

Almost half of the franc-bearish trades that went through Monday bet that euro would trade above the 0.98 handle after mid-April, a 2% advance from current spot levels, while a 132 million euro call expiring mid-August targeted a move above parity.

Money markets assign a 72% probability that the SNB will deliver a quarter-point reduction in the benchmark to 0.25% this week. Conviction over rate cuts has declined this month due to tolerable low inflation, resilient economic growth and the weaker franc.

Currency traders are positioning for a rate cut, as shown by so-called risk reversals, which trade in favor of the euro. The options gauge, which depicts the appetite for trades that benefit from a rise or fall in a currency, became the most bearish in a year for the franc when Germany first announced its spending plans.