USD/JPY: Bearish bias in options market at weakest since Jan 23

• Risk reversals retrace bearish bias as USD/JPY spot jumped to two-week highs.

The USD/JPY one-month 25 delta risk reversals (JPY1MRR) are being paid at 1.10 JPY calls vs. 1.525 JPY calls on March 23 and 2.425 JPY calls on Feb. 12.

The decline in the implied volatility premium for the JPY calls (buy JPY) indicates the falling demand for protection against the drop in the USD/JPY.

Also, the implied volatility premium for JPY calls is the weakest since January 23. (Risk reversals at highest since Jan 23). The risk reversals gauge adds credence to the recent rally in the USD/JPY pair to a two-week high of 107.01 and suggests scope for further gains. 

JPY1MRR