Traders bought two-month double no-touch options on the Japanese yen/U.S. dollar pairing early last week, said a trader in Tokyo. Betting that the yen would stay range-bound, the binaries have ceilings at JPY116 and floors at JPY125, he noted. Some traders bought one- to two-month dollar calls struck at JPY121 with knockouts at JPY116, he said. One-month options volatility hovered around 13%, relatively unchanged from the week before.
On Tuesday the yen weakened to JPY117.25, from a high of JPY116.15 Monday, largely affected by comments made by Eisuke Sakakibara, the former Ministry of Finance foreign exchange chief, that a spot of JPY125 would be good for Japan's economy. Dubbed Mr. Yen, he is famous for his ability to influence foreign exchange markets. Options trading was thin though as much of Asia closed Tuesday for the Chinese New Year holiday. The previous Tuesday, the yen stood at JPY117.
The yen is expected to hold a JPY115-120 range for the next couple of months, before weakening out of that range after fiscal year-end in March, said Ronald Leven, senior currency strategist at Lehman Brothers in Tokyo. The yen has been sliding against the dollar since September last year, when it hit a high Sept. 6 of JPY104.72, he said. While it is hard to pinpoint a specific event that triggered this, large acquisitions like NTT DoCoMo's of AT&T Wireless in December, generated a lot of dollar buying towards year-end, he said. Also, a slow-down in the U.S. economy has been expected to hurt Japan's already vulnerable economy.
