Japanese Yen Futures Volatility Forecast (27/09/2011)

Japanese Yen Futures opened at 130.4 on Monday and remained at the same level on Tuesday, moved to 130.5 on Wednesday, rose to 131.2 on Thursday and closed at 130.4 on Friday.

The actual volatility is 0.45% (7.1% annualised) and the TGARCH curve is clearly moving sideways. It would appear that market participants do not expect wild fluctuations in the price action, at least in the short term, although the fact that the conditional variance did not increase despite the consistent drop occurred on Friday is a bit of a warning signal.

Japanese yen futures decreased sharply on Friday even if the equity markets saw an heavy sell-off because the intervention of the central bank of Japan scared away many investors that are now looking for protection elsewhere.

The HyperVolatility team is neither bearish nor bullish. We think that there could be a very short term explosion of the volatility in the first 2 days of the week but the overall picture should remain almost unchanged with futures prices probably settling around the 130 – 130.5 area by Friday.

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