Traders Seek EM Currency Hedges at Fastest Pace in Six Years

Traders are buying protection against losses in emerging-market currencies over the coming month at the fastest pace since the start of the Covid-19 pandemic, according to a key options pricing measure.

One-month risk reversals — derivatives measuring the relative cost of downside insurance versus upside exposure — on an index of emerging currencies tracked by JPMorgan Chase & Co. have risen sharply in recent days, as concerns grow of a prolonged conflict with Iran that keeps oil prices elevated. They are now trading above equivalent one-year contracts, an unusual scenario where investors are paying more for protection at the front-end of the options curve than further out.