• USD/JPY FX option volatility and downside risk premiums fell this week

• Decline presented opportunity, with spot traders still keen to sell USD/JPY

• Option buyers would have already reaped rewards as prices increase Thursday

• 1-month expiry implied volatility back to 10.5 from 9.75 on Wednesday

• On a typical $30-million trade, that's a premium increase of $50,000

• Risk reversals recover, too - 1-month now 1.4 from 1.15 JPY calls over puts

• Price recovery and ongoing demand shows traders wary of more USD/JPY losses
USD/JPY 1-week and 1-month expiry FXO implied volatility


USD/JPY 25 delta risk reversals

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