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JPY: Overnight Vols Spike But Sub 2024 Highs

JPY
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Not surprisingly, USD/JPY overnight implied vols sit elevated. We were last around 24%. This comes ahead of tomorrow's BoJ meeting outcome and while this level is above what prevailed prior to previous BoJ meetings this year, we of course have the Fed meeting out late on Wednesday US time as well. 

  • Overnight vols are also still earlier 2024 highs, which were in the 35-40% region. The implied range on USD/JPY is 152.21-154.69 for the next 24 hours or so, based off a 77.4% probability.
  • This fits with a no change expected from the BoJ tomorrow, while the Fed is widely expected to cut. More focus is likely to be on the 2025 outlook. This may deliver fresh USD/JPY shifts but may not be trend changing.
  • Longer term implied vols are painting a more benign picture with the 1 and 3 month both around 10%, close to recent lows. It's a similar backdrop for 6 month and 1yr impliedsvols, although we sit more elevated relative to earlier in 2024, see the chart below).
  • Uncertainty around US policies, the Fed outlook and the BoJ outlook into 2025 are likely driving such trends
  • In the risks reversal space we sit off recent highs but still comfortably with a negative skew. We are comfortably away from 2024 extremes. 

Fig 1: USD/JPY Vols - Overnight Spiking Ahead Of FOMC & BOJ 

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Not surprisingly, USD/JPY overnight implied vols sit elevated. We were last around 24%. This comes ahead of tomorrow's BoJ meeting outcome and while this level is above what prevailed prior to previous BoJ meetings this year, we of course have the Fed meeting out late on Wednesday US time as well. 

  • Overnight vols are also still earlier 2024 highs, which were in the 35-40% region. The implied range on USD/JPY is 152.21-154.69 for the next 24 hours or so, based off a 77.4% probability.
  • This fits with a no change expected from the BoJ tomorrow, while the Fed is widely expected to cut. More focus is likely to be on the 2025 outlook. This may deliver fresh USD/JPY shifts but may not be trend changing.
  • Longer term implied vols are painting a more benign picture with the 1 and 3 month both around 10%, close to recent lows. It's a similar backdrop for 6 month and 1yr impliedsvols, although we sit more elevated relative to earlier in 2024, see the chart below).
  • Uncertainty around US policies, the Fed outlook and the BoJ outlook into 2025 are likely driving such trends
  • In the risks reversal space we sit off recent highs but still comfortably with a negative skew. We are comfortably away from 2024 extremes. 

Fig 1: USD/JPY Vols - Overnight Spiking Ahead Of FOMC & BOJ 

Keep reading...Show less