(Bloomberg) -- Sellers of Australian dollar options are poised for a nail-biting 90 minutes of trading immediately after a pivotal US inflation report is released.

That’s because the data, which is expected to guide expectations for the Federal Reserve’s policy, is due one and a half hours before A$1.36 billion ($899 million) worth of options on the Aussie dollar-greenback pair expire, according to Depository Trust and Clearing Corporation data.

The problem for traders who have sold the options is that inflation figures may spur swings in the Aussie that’s trading just a whisker away from the 0.6645 strike price — the predetermined level at which the currency may be purchased or sold against the dollar.

To hedge their option exposure, these traders need to sell the currency pair when it’s below the strike price, and buy when it rises above the level. High volatility can compound losses.

“As FX options near expiration any small changes in the spot price may result in huge swings in option value,” said Mingze Wu, Singapore-based currency trader at Stonex Financial Pte Ltd.  “Active hedging during such scenario is almost a must to protect the option position, but will also lead to expensive hedging costs when spot price whipsaws around the strike price”

The Aussie dollar is down 3% versus the greenback this year as investors have pared expectations for Fed rate cuts, while increasing bets that the Reserve Bank of Australia will start easing monetary policy in coming months.

In addition to US inflation data, Thursday’s US producer price index and next week’s Australian employment data will also be watched for the currency pair’s trajectory.

--With assistance from Ruth Carson.

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