USD/JPY risk reversals retreat from 6-month high, Vols rise

The USD/JPY one-month 25 delta risk reversals fell from the 6-month high of -0.70 to -0.80 yesterday, while the one-month at the money option volatility ticked higher to 7.09 from 6.948.

The drop from -0.70 to -0.80 indicates weakening bias for the bullish bets (call options).

Risk reversals and Vols

  • The drop in the risk reversals could be an indication that investors are finally giving up on the hope of a bullish break in the USD/JPY pair above 114.18 levels.
  • The vols may have ticked higher, but still remains at 2-1/2 year low.

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