The Dollar-Yen pair rose to 113.26 on Wednesday and currently remains bid above 113.00. The options market is not buying the near 90 degree rally in the USD/JPY pair.
Risk reversals drop
The one-month 25-delta risk reversals fell to -1.6 yesterday; the lowest level since September 8. The decline in the risk reversals indicates that investors are hedging against long spot positions, i.e. demand for the put options is on the rise.
US-Japan 10-yr yield spread
The rally in the pair is backed by the US-Japan 10-year spread, which currently stand at 27 basis points [bps]; the highest level since July 10 high.
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