USD/JPY Risk Reversals jump to 3-month high

The Dollar-Yen one-month risk reversals gauge jumped to a 3-month high of -0.85 on Tuesday, suggesting falling demand for downside bets, i.e. put options.

25-delta risk reversals show the difference in volatility between puts and calls. A positive number indicates upside protection on the underlying forex spot [calls] is relatively more expensive. A negative number indicates puts are more expensive than calls.

The improvement in the risk reversals adds credence to the solid rally in the USD/JPY spot and the Treasury yields.