AUD/USD risk reversals - Put bias strongest since early September

• AUD/USD risk reversals drop to lowest since Sept. 4.
• AMT option Vols rise.

The AUD/USD one-month 25-delta risk reversals are being paid at 0.85 AUD put (-0.85 reading); the lowest level since Sept. 4 vs. 0.80 AUD put on Friday and 0.175 AUD put on Jan. 25 (recent high).

The slide indicates rising demand for the bearish bets (put) on the Aussie dollar. The drop in the risk reversals to 5-month low adds credence to Friday's sell-off in AUD/USD  

Also, the one-month at the money (ATM) option volatility gauge has jumped to 8.975 - the highest level since mid-September.

The combination of rising demand for AUD puts and a spike in volatility indicates the dealers expect the AUD to explore the downside below 0.79 levels in the short-run.