• Intervention threat and FX option long gamma positioning has been helping to contain USD/JPY spot

• Much of that long gamma is derived from exotic option positions - like barriers/triggers at/above 160.00

• Dealers say many of these options are due to expire over the next week and could loosen USD/JPY's shackles

• The recent volatility drought has helped to reduce FX option volatility premiums to 4-year lows

• However, post June 3 options attracting buyers - BoJ Gov Ueda due to speak - market looking for any policy signals
Benchmark 1-month expiry FXO implied volatility


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