The dollar rises against the yen for a year, but options trading causes it to decline

 The dollar rises against the yen for a year, but options trading causes it to decline

Analysts said that there were around $1.25 billion worth of options contracts with a 152 strike price scheduled to expire at 10 a.m. ET (1500 GMT). They said that another $2.2 billion was scheduled to expire on November 15.

On November 13, the dollar rose to its highest level against the Japanese yen in over a year, almost reaching the crucial psychological level of 152. However, after a frenzy of activity in $3.45 billion of options that are due this week, the dollar plummeted significantly.

Analysts said that there were around $1.25 billion worth of options contracts with a 152 strike price scheduled to expire at 10 a.m. ET (1500 GMT). They said that another $2.2 billion was scheduled to expire on November 15.

At 9:42 a.m. (1442 GMT), the dollar reached its highest level since October 2022, 151.92 yen, before plunging to 151.20 minutes after the strike price. At 151.74, it was recently up 0.14%.

Shunichi Suzuki, the finance minister of Japan, had earlier said that the government will continue to watch the currency market and take necessary action. This year, the yen has lost over 14% of its value relative to the dollar.

According to Marc Chandler, chief market analyst at Bannockburn Global Forex in New York, the Bank of Japan's intervention did not cause the yen's strong recovery versus the dollar.

Not the BOJ, that is. The dollar/yen dropped after almost hitting the peak at 10 a.m. last year," he said. "The options expiration at 10 a.m. is the crucial issue. Early in October, the same incident occurred."

Over the following three days, Chandler predicted that soft readings of the consumer price index (CPI) and other U.S. statistics may relieve some of the pressure on the declining value of the Japanese yen.

According to him, the U.S. is expected to post weaker CPI for the first time in four months on Tuesday, experience the first drop in retail sales since January on Wednesday, and see some weakness in industrial output on Thursday, partially because of the United Auto Workers auto strike.

According to statistics released on Monday, Japanese wholesale inflation dipped below 1% in October for the first time in less than two and a half years. This suggests that the cost pressures that had been pushing up prices were beginning to lessen and that the yen was losing ground.

The fight against inflation is still ongoing, according to Federal Reserve officials, including Chair Jerome Powell. This realization led to a retraction of market expectations on interest rate cuts, which raised short-dated Treasury rates and strengthened the currency.

The dollar index, which compares the value of the US dollar to other major currencies, remained mostly unchanged at 150.75.

The announcement that Moody's had downgraded the outlook for U.S. credit from stable to negative late on Friday elicited little response from the market.

The markets have been on the lookout for Tokyo's possible action to support the weak yen.

"Risks of Japanese currency intervention are still about pace at this moment, so if we move at the current pace it is sustainable for Japan," senior macro analyst Geoff Yu of BNY Mellon said.

"Overall, the dollar landscape is driving things," he said.

The euro was slightly lower at $1.0687 as sterling crept higher after British Prime Minister Rishi Sunak's reorganization of important cabinet positions.

Following reports of changes to the UK government's composition, the value of the British pound was around 0.2% higher versus the euro at roughly 87.20 pence and 0.21% stronger at $1.2254.

In a change precipitated by his dismissal of Interior Minister Suella Braverman for criticizing the police and seeing it as a challenge to his power, Sunak reinstated previous leader David Cameron as Foreign Minister.