• Short-dated USD/JPY option demand rises after USD/JPY breaks 162.00 barriers for a new 40-year high

• Options expiring Friday/early next week most sought — capturing both NFP volatility and possible MoF intervention

• A strong NFP extending USD/JPY gains raises intervention risk — thin holiday liquidity amplifies the threat

• Friday's US holiday thins liquidity sharply — giving MoF the ideal window to weaken USD/JPY with maximum impact

• Traded options include many downside strikes, while risk reversals maintain a high JPY call over put vol premium

• Market clearly wary of intervention risk and Thursday/Friday NFP and holiday window seen as an ideal opportunity
1-week and 1-month expiry USD/JPY FXO implied volatility


USD/JPY 25 delta risk reversals


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