- The JPY call value has nosedived in the aftermath of the BOJ decision, risk reversals indicate.
- The sharp uptick in the risk reversals adds credence to USD/JPY’s move above the key hurdle.
The one-month 25 delta risk reversals (JPY1MRR) have jumped to -1.00, their highest level since July 18 indicating a falling demand or the implied volatility premium for JPY calls (bullish bets).
The risk reversals had hit a low of -1.5 on Monday, as investors sought downside protection (JPY calls) against long USD/JPY position on fears the BOJ might announce a hawkish policy tweak.
However, the central bank refrained from raising the long-term yield target and only announced a wider target range (to 0.2 percent from 0.1 percent), thus making the ultra-easy policy more sustainable.
Consequently, the USD/JPY pair rose above 111.55, confirming a long-run pennant breakout and the demand for JPY bullish bets (JPY calls) fell sharply.
JPY1MRR
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