A sure sign that the USD/JPY rally is settling into a consolidation is talk in the options market that downside strikes are suddenly in demand. Japanese exporters are the logical buyers of those strikes, trying to lock in some hedges in case the JPY slide stalls.
For more than a month, protection has been almost exclusively sought for the upside.
With a second minister overnight warning on the impact of yen weakness, it seems clear that the Japanese government is content to try and slow the pace of this runaway train.
Expect talk of 85/90 DNTs to surface in the days ahead. Not a bad play on a short-term (under a month) basis.
