LONDON, Dec 3 (Reuters) - Trader demand for protection against big swings in the euro hit its highest since March 2023 on Tuesday, as political uncertainty flared in France, where Prime Minister Michel Barnier's minority government could fall this week.
Three-month implied options volatility for the euro, a measure of trader hedging demand briefly rose to a high of 8.172%, the most since the banking crisis that claimed Swiss lender Credit Suisse nearly two years ago. Implied volatility was last at 8.11%.
The euro itself was last down 0.1% at $1.04867, having recorded its largest daily fall in around a month on Monday, with a slide of 0.74%, as French opposition parties said they would lodge a no-confidence motion to oust Barnier over his unpopular budget.
There is also a high degree of uncertainty about how much the European Central Bank may cut rates when it meets later this month, which is also feeding into euro volatility, according to Pepperstone strategist Chris Weston.
"Buying euro vol certainly made sense given the uncertainty of the ECB's (and the Fed’s) next move and the French political risk premium," he said.
Reporting by Amanda Cooper; Editing by Louise Heavens
Source: Reuters