Forex Flash: Don't be fooled by USD/JPY risk reversals - Societe Generale

FXstreet.com (Barcelona) - Sebastien Galy, Senior FX Strategist at Societe Generale notes that the entire USD/JPY RR curve is now trading in negative territory and in his view, this move has nothing do to with a reversal in the market perceptions of the yen, but is essentially due to mechanical effects.

He writes, “Only the skew sold off while the ATM vol curve barely moved, the latest spot spike was actually much less volatile than the previous ones, and the short vol exposure of market makers switched from topside to downside. We recommend reloading upward exposure via USD/JPY calls down-and-out.”