In the midst of the lack of general agreement over where the yen is headed, the cost to hedge against changes in the Yen over a year using options has spiked to the highest level in more than three years. A Bloomberg survey shows that the global bank’s predictions for the Japanese currency range from a call for a 14 percent rally from now through 2017 to that for a 9 percent decline.
The yen’ one-year implied volatility versus the dollar, a major part of option prices, rose 54 basis points this week to 12.49 percent, a level that haven’t been seen ever since September 2013. The measure went up 43 basis points over the actual spot-market volatility, the widest gap in more than a month.
The volatility curve has moved higher since the start of this year even as shorter-end option process trade close to last year’s averages. Still, it remains upturned as front-end prices have gone up even more. Prior to the press conference of U.S. President-elect Donald Trump, the one-week measure went up 1.5 percentage points today to 14 percent.
Investors look to hedge their dollar-long positions in the spot market so options that secure against dollar dips against the yen were in demand this week, whereas according to traders in London, trading in a longer continuous course was mixed.
Investors are taking the hits as analysts get into an argument over how the yen will move this year.