February 22, 2017 / 9:08 AM / 6 months ago

Euro implied volatility rises on French election nerves

LONDON, Feb 22 (Reuters) - The cost of hedging against big falls in the euro over the next three months hit the highest in more than two months on Wednesday, as investors sought protection from currency volatility around France's presidential election.

The three-month euro/dollar "risk reversal", meanwhile, fell to minus 3.1 percent, surpassing the lows it had hit in the aftermath of Britain's EU referendum. That indicated that investors are strongly favouring puts -- bets the euro will fall -- over calls, which pay out if the euro rises.

Three-month euro/dollar implied volatility, an option used to hedge against big price swings in the exchange rate, rose to 11.2 percent, its highest since Dec. 19 and close to its highest since just after the Brexit vote. (Reporting by Patrick Graham and Jemima Kelly)

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