TRADERS aren’t adding bearish options on the yuan as quickly as before, amid expectations China may take more steps to arrest the currency’s decline.

The notional value of new options betting the yuan will weaken past 7 per U.S. dollar dropped to the lowest in two months two weeks ago, according to data from Depository Trust & Clearing Corp. (DTCC). Bets are still coming at a faster pace than the few months before June though, when the currency started to slide as the trade dispute with the United States brewed. That’s left the value of outstanding contracts at US$130 billion, around the highest in seven months.

The People’s Bank of China (PBOC) has tried to slow depreciation in the yuan, the weakest currency in Asia over the past three months with a more than 6 percent slide against the dollar. Steps taken include making it more expensive to short the currency and setting the daily yuan reference rate stronger than expected for all but three days since the start of August. A recent spike in the yuan’s offshore funding costs also helped stabilize sentiment.

New yuan put options, which provide the right to sell the currency, with a strike price of 7 or weaker totaled US$3.3 billion in the first week of September, according to calculations based on DTCC data. That’s about a quarter of August’s peak. The slower increase came after a sharp buildup since June, with the notional value of such outstanding contracts jumping nearly 70 percent within three months.

The yuan weakened over that period amid concern the trade tensions would dent China’s economy and encourage the central bank to ease monetary policy further to support growth. A selloff of assets in emerging markets such as Argentina and Turkey is also pressuring the yuan.

The PBOC’s measures to support the currency haven’t been as intense as those taken in late 2015 and 2016, when the offshore yuan’s interbank borrowing costs and deposit rates surged to record highs.

China still has plenty of tools if it’s determined to slow the yuan’s descent, and that makes betting against the currency riskier. As such, offshore investors are favoring conservative option structures that have limited downsides with more “realistic” strike prices, which is very different from a few years ago, Charles Feng, head of macro trading for greater China at Standard Chartered, said last month.

(SD-Agencies)