Risk reversal is a measure of volatility skew using options market. In simple words, it is basically volatility difference between call and put. So greater the demand for a particular option, greater is the price and higher is the implied volatility.
Current measure of 1 week risk reversal in USD/JPY has reached highest point since 2012, when actually governor Kuroda delivered monetary policy stimulus. Risk reversal is around 1.5 suggests that investors are betting more to the longer side for the Dollar/Yen pair.
It seems, expectations are high for governor Kuroda to act further with additional stimulus, failing which there could be sharp reversal in Dollar/Yen pair.
Yen is currently trading at 121 per Dollar. Chart courtesy Aurelija Augulyte.


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