
Yen exotics re-hedging fuelled vol surge, say traders
USD/JPY spike forced dealer stampede into call options, pushing FX vol even higher

At the end of March, sharp movements in the Japanese yen against the US dollar caught some foreign exchange options dealers off guard, triggering a scramble to re-hedge exotic books and driving volatility even higher in the process.
Diverging policies on interest rates between the US and Japanese central banks have seen the value of the yen plunge in recent weeks, falling from 114.92 on March 3 to 126.08 on April 13. Prior to the move, hedge funds had bought protection against a rise in the US
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