• USD/JPY extends its 40-year high to 162.84 Wednesday, 163.00 option barriers are the next major resistance

• FX option implied volatility extends gains - 1-month to 8.2 from 6.8 on Monday when spot was still below 162.00

• 1-month risk reversals retain a strong vol premium for JPY calls over puts despite higher spot - flags intervention risk

• Butterfly spread options maintain multi-year highs - would benefit from a bigger FX move in either direction

• There's also been outright demand for JPY puts with strikes at 164-165 - suggesting traders not ruling out more FX gains

• Thursday's NFP a key catalyst — a strong beat could fuel more USD/JPY gains and heighten intervention risk

• Thin liquidity amid Friday's US holiday could amplify intervention impact — ideal window for MoF to act
1-week and 1-month expiry USD/JPY FXO implied volatility


USD/JPY 25 delta risk reversals


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