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2025-07-29 18:00:29
[Yen Options Weakness: The Calm Before the Storm or the Prelude to a Trend Reversal?] ⑴ FX options data suggests low market concerns about USD/JPY's recent breakout from its consolidation range. ⑵ Implied volatility has reached its lowest level in four months across all 1- to 12-month periods. ⑶ 1-month implied volatility stands at 9.3, 2.0 below its level before the July 20th Japanese general election. ⑷ 1-month risk reversals remain at 0.9, indicating downside risk appetite is in the middle of its recent range. ⑸ While traders have reduced their demand for downside protection against the yen, hedging against upside risk has not increased significantly. ⑹ Only ultra-short-term options saw support ahead of the Federal Reserve and Bank of Japan meetings and the release of non-farm payroll data. ⑺ The current low volatility level may provide value for hedging against potential future sharp exchange rate fluctuations. ⑻ Goldman Sachs prefers to bet on the next leg of the dollar's decline through yen options.
