USD/JPY Risk Reversals drop: Investors hedge against long spot positions

The Dollar-Yen staged a solid rebound from the 10-DMA support on Tuesday. The currency pair closed above its 200-DMA and rose to a high of 112.55 levels.

The rebound could be attributed to hawkish Yellen and fading North Korea tensions.

Risk reversals drop

• One-month 25-delta risk reversals dropped to -1.325; the lowest level since September 11.
• The decline in the risk reversals indicates rising demand for the downside bets, i.e. Put options.

Clearly, investors are seeking downside protection against long spot positions.