- The USD/JPY put demand or implied volatility premium has hit five-week lows, according to risk reversals.
- The market participants are likely expecting dollar rally to continue.
The USD/JPY one-month 25 delta risk reversal (JPY1MRR) hit five-week highs Friday, signaling that investors are likely positioning for further dollar rally.
As of writing, the risk reversals are being paid at 0.925 USD/JPY puts (bearish bets) compared to 1.5 USD/JPY puts on Oct. 26.
The drop in the implied volatility premium for put options from 1.5 to 0.925 validates the pair's bullish reversal from 111.38 to 114.00 witnessed in the last two weeks.
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