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  • USD/JPY risk reversals hit a  one-month low, shows rising demand for JPY calls.
  • Indicates investors are prepping for a deeper pullback in the USD/JPY.

The USD/JPY one month 25 delta risk reversals (JPY1MRR) fell to -0.95 – the lowest level since April 20 vs -0.65 on April 18.

The decline in the risk reversals represents a rise in the implied volatility premium for the Japanese Yen calls (bullish bets).

The risk reversals add credence to the drop in the USD/JPY pair from 111.40 to 110.42 and indicate investors could be hedging (via JPY calls) against a deeper drop in the spot.