Sharp drop in USD/JPY risk reversals
LONDON - Analysts say the price of yen puts dropped to levels not seen since August 2008 last week, as the market settles into an environment that is less exposed to the carry trade.
Risk reversals on three-month 25 delta USD/JPY options dropped to -2.94 vols on February 27 after touching lows of about -10% in November last year, amid an accelerated unwind of the carry trade. This indicates the puts are becoming cheaper than the calls, as risk reversals measure the differences between the prices
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