TOKYO (Dow Jones)--Dollar/yen currency options rose as the underlying exchange rate declined Monday, prompting players to buy protection to hedge against further falls in the greenback threatened by upcoming U.S. data.
The dollar stood at Y91.58 as of 0300 GMT, down from an intraday high of Y92.23.
The fragile spot market sent benchmark one-month at-the-money currency options, as measured by implied volatilities, to 12.85%/13.55% compared to 12.75%/13.45% in New York Friday.
With the outlook for the dollar's downside remaining strong, one player bought three-week dollar-put/yen-call options with a Y91.00 strike price at 13.40%, an options trader at a major Tokyo bank said. The deal makes money for the holder if the U.S. unit slips below the strike price. The dealer said the amount of the deal is unknown.
Options traders said implied volatilities may climb further to 13.50%, if upcoming U.S. economic data turn out weaker than expected, pushing the dollar down.
"If data show weakness of the U.S. economy, that may weigh on dollar-yen. But the fall may be very gradual unless the dollar falls below (the psychologically key) Y90," said an options trader at a major Tokyo bank.
Market participants are focused on Tuesday's Case-Shiller home price index for August, the first estimate of the U.S.'s gross domestic product in the third quarter on Thursday, and Friday's personal spending for September.
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