• Limited and familiar USD/JPY ranges around 158.00 pressed FX option implied vols lower this week

• Range-bound spot favoured option sellers with actual/realised volatility being well below implied levels

• However, risk reversals held a firm downside strikes premium - recognising the most vulnerable side of the market

• Thursday's spot drop to mid Oct lows toward 157.00 appears to have caused some panic demand for options

• Benchmark 1-month expiry implied volatility paid 7.65 from 7.15, with some sub 157.00 strikes paid, too

• Huge FX option strike expiries surround USD/JPY in low 157's - related hedging flows may limit deeper spot decline
USD/JPY FXO implied volatility

(Richard Pace is a Reuters market analyst. The views expressed are his own)