Nervous currency traders are paying the most in eight years forinsurance against a plunge in the dollar.

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With the Federal Reserve expected to hold interest rates steadyWednesday, traders in the $5.1-trillion-a-day currency market arepaying an added premium for the first time since October 2009 onoptions to protect against an extreme decline in the dollar againstthe euro over a six-month tenor. One measure, known as a 10-deltarisk reversal, is an indication of trader bias in the optionsmarket, which currently reflects expectations that any move in theeuro would be dramatic.

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What's more, investors are piling into options contracts inanticipation of big moves in the euro-dollar exchange rate, keepingan eye on whether the pair breaks above the key $1.1714level, the high from August 2015. Traders bought morethan $6 billion in options to sell dollars and buy euros on July 20and 21, and an additional $3 billion to sell the greenback againstthe yen, according to Depository Trust Clearing Corp. data.

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The Bloomberg dollar spot index has lost about 8 percent thisyear, with shifting interest-rate differentials at the root of thedecline.

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The dollar fell to a 14-month low last week after EuropeanCentral Bank President Mario Draghi said policy makers will discussin the autumn any plans for tapering quantitative easing. It alsoslumped on July 20's news that U.S. special counsel Robert Muelleris probing transactions involving President Donald Trump'sbusinesses and those linked to his associates.

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Bloomberg News

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