Volatility declined in the dollar-yen options market, with option selling prevailing as participation was limited ahead of Japan’s holiday period. Yen put buying exceeded yen call buying amid expectations of further yen weakness, while short-dated options showed little change.
Volatility in the dollar-yen options market declined ahead of Japan’s holiday period as the number of market participants dwindled. Expectations of range-bound trading spread across the market, with selling of options standing out.
In risk reversals, yen put buying exceeded yen call buying across all tenors except the short term, indicating a tendency to hedge only limited downside risk for the yen. Volatility declined for the 1-month, 3-month, 6-month and 1-year tenors.
Short-dated options continued to show little change, narrowing the volatility gap between short- and long-dated options. Market participants continue to closely monitor market developments after Japan’s holiday period.