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  • USD/JPY risk reversals have hit three-week lows.  
  • The confirmation of short-term bearish reversal in USD/JPY seems to have revived interest in JPY calls.  

The USD/JPY one month 25 delta risk reversals (JPY1MRR) fell to -1.35 today – the lowest level since June 29 vs from -0.65 seen on last Tuesday,  indicating a sharp rise in the demand or implied volatility premium for the JPY puts.  

The data suggests the short-term bearish doji reversal in the USD/JPY spot has likely triggered fears of a deeper pullback and hence the investors are seeking downside protection (JPY calls or USD/JPY puts).