One-week currency options volatility for USD/JPY briefly surged into the 11% range. After reaching 158.97 in London trading, USD/JPY plunged to 156.36 at one point. As expectations of a Bank of Japan rate hike grow, the unwinding of yen carry trades is intensifying.
Early in the London session, the one-week currency options volatility measure rose above 10%, briefly reaching 11.09%. USD/JPY plunged to 156.36 at one point after reaching a high of 158.97.
Market views suggest that the unwinding of yen carry trades may accelerate in the next phase, with expectations of a Bank of Japan rate hike potentially having an impact. One-month volatility stood at 9.23%, above levels for three months and longer.
Market data showed changes in risk reversals that confirmed the sharp rise in one-week volatility, with the premium for yen calls widening to 2.505 points, its widest level since 4 August. The market is expected to remain in a period of changing conditions.