• Another drop in USD/JPY to the mid 156's puts it down by 300 JPY pips in the last 24 hours

• USD/JPY option premiums are significantly higher as implied volatility spikes, with JPY calls at the fore

• Benchmark 1-month implied vol 7.3 to 9.75 since Wednesday - biggest gains since late July intervention when it peaked 10.0

• 1-month 25 delta risk reversals 1.0 higher at 2.7 - (3.0 was the peak amid late July official intervention)

• Dealers report demand for JPY call strikes as low as 150.00 with expiries over coming months

• All JPY call options (strike below spot) will increase in value amid lower spot/higher implied volatility
USD/JPY FXO implied volatility


USD/JPY 25 delta risk reversals

(Richard Pace is a Reuters market analyst. The views expressed are his own)