Westpac - "We have maintained a highly sceptical view towards the recent plunge in the value of the ¥. We think verbal intervention has played a much larger part in pushing the ¥ down than most believe. This makes yesterday’s G7 statement all the more important for USD/JPY. We therefore recommend selling USD/JPY via options.
(...) We have bought half a unit of a 2 week 92 USD/JPY put for a cost of 0.58% of USD (spot reference 93.00 and volatility of 13.3%). While volatility is expensive at the moment, it is expensive for a good reason - 2 week realised daily volatility is currently at 15%. The recent aggressive swings in sentiment mean it is all but impossible to sell spot without a very wide stop. The two week time horizon looks optimal for us as it takes into account a number of key events including tomorrow’s Japanese GDP release and the BoJ meeting, this weekend’s G20 meeting, the Italian elections (Feb 24/25) and Bernanke’s semi-annual testimony on monetary policy to the Senate Banking Committee (Feb 26). We see a move back towards the 88/89.5 area as a reasonable target on a USD/JPY correction in the coming weeks."