USD/JPY risk reversals hit record low for 5th straight day on put demand

Risk reversals on USD/JPY slip to record lows on rising demand for puts.
A put option gives the holder a right to sell the underlying at an agreed price on or before a particular date.

Omkar Godbole FXStreet Contributor

Put options (bearish bets) on USD/JPY continue to draw bids amid sustained risk aversion in the global equity markets.

A one-month risk reversal, a gauge of calls to puts on the currency pair, has set a new record low of -8.90 for the fifth straight day, a sign of strengthening demand or implied volatility premium for put options.

The gauge first hit a record low on March 6 when it dropped from -2.925 to -4.425 and has witnessed a near-90 degree drop from -0.65 over the last three weeks. A negative number indicates the premium claimed by puts is higher than that for calls.

That said, consecutive record lows in risk reversals are indicative of extreme bearish sentiment. In such cases, markets usually see a strong move in the opposite direction.

USD/JPY is currently trading at 103.37, representing a 1.9% drop on the day. The pair topped out above 112.22 on Feb. 20 and fell to a low of 101.18 on Monday, following which a minor corrective bounce to 105.92 was seen.

Risk reversals

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD treads water above 1.1850 amid thin trading

EUR/USD stays defensive but holds 1.1850 amid quiet markets in the European hours on Monday. The US Dollar is struggling for direction due to thin liquidity conditions as US markets are closed in observance of Presidents' Day.

GBP/USD flat lines as traders await key UK and US macro data

GBP/USD kicks off a new week on a subdued note and oscillates in a narrow range near 1.365 in Monday's European trading. The mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.

Gold slides below $5,000 amid USD uptick and positive risk tone; downside seems limited

Gold attracts fresh sellers at the start of a new week and reverses a part of Friday's strong move up of over $150 from sub-$4,900 levels. The commodity slides back below the $5,000 psychological mark during the Asian session, though the downside potential seems limited amid a combination of supporting factors.

Bitcoin, Ethereum and Ripple consolidate within key ranges as selling pressure eases

Bitcoin and Ethereum prices have been trading sideways within key ranges following the massive correction. Meanwhile, XRP recovers slightly, breaking above the key resistance zone. The top three cryptocurrencies hint at a potential short-term recovery, with momentum indicators showing fading bearish signs.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.