Volatilities implied by one-month at-the-money USD/JPY options are down at 8.55%/9.10% vs 8.95%/9.25%, as concerns over the Greek debt crisis have eased somewhat before an informal meeting of European leaders Wednesday, reducing demand for hedge instruments and leading to a decline in volatilities across the board, says a senior options dealer at a Japanese bank. "Many are keen to unload their hedge positions as the chances of a wild fluctuation are now receding," he adds. A one-month USD/JPY risk reversal was traded 0.1% over in favor of the USD, while three-month was traded 0.2%-0.3% over in favor of the USD Monday, reflecting the market view that the USD/JPY will resume rising, he adds.
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