USD/JPY risk reversals: demand for JPY calls continues to drop
The USD/JPY one-month 25 delta risk reversals are being paid at 0.625 JPY calls (the level was last seen in early January) vs 2.425 JPY calls seen on Feb. 12.
The decline in the implied volatility premium for the JPY calls indicates falling demand for the Yen bullish bets (call options). Clearly, investors expect the USD/JPY to rise further.
The pair took out the resistance at 110.04 (61.8 percent Fibonacci retracement of Jan-Mar drop) in a convincing manner yesterday, tracking the rise in the treasury yields and looks set to extend the rally further to 110.84-111.00 in the short-run.