USD/JPY briefly fell to around 158 on Wednesday after the U.S. Treasury said it
would expand long-term Treasury repurchase operations, lifting option implied
volatility. Traders bought strikes as low as 157.00 to hedge further USD/JPY
downside. The one‑month 25‑delta risk reversal rose from 1.85 to 2.0, widening
the premium for yen calls over puts. With spot back in the mid‑to‑high 158s, vol
sellers have re-entered and realized volatility remains low. Spot still below
160 reduces near‑term risk of Japanese FX intervention. Despite increasing bets
on accelerated BOJ tightening, investors have not formed a firm expectation of
sustained yen strength; option flow suggests the market remains unconvinced the
yen can extend gains.
