Volatilities implied by one-month, at-the-money USD/JPY options were steady at 6.32%/6.62% from 6.25%/6.65% in New York Monday. An options dealer at a major bank in Tokyo says options are being sold ahead of the FOMC meeting, but adds "I can't see volatilities falling below 6%." He says that the market is expecting QE3 to be announced at the meeting, following Fed Benanke's recent comments at Jackson Hole and Friday's weaker-than-expected U.S. jobs data. He notes one market participant traded a two-month at-the-money straddle with an implied volatility of 6.7%; the notional value was $30 million. The USD/JPY is last at 78.22.
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