BUZZ-FX options wrap - JPY leads vol bounce with central bank help

Feb 20 (Reuters) - Broader FX option implied volatility hit new 2025 lows before some pairings posted fresh gains in the last 24 hours.

USD/JPY led the move after spot finally broke the key support at 150.93 to test below 150.00. This lifted 1-month implied volatility to 10.85 at Thursday's London open, up from 9.3 on Wednesday. This significant jump was helped by the 1-month expiry date now including both U.S. and Japanese policy announcements on March 19. However, mild supply has since pulled the price back to 10.35 as spot consolidates in the low 150s.

EUR/USD implied volatility was also higher after spot tested the lower end of the recent 1.04-1.05 range, although it recovered toward some huge FX option strike expiries in the mid 1.04s.

Lower option premiums had already started attracting EUR/USD hedgers, especially those targeting downside strikes expiring after the German election. A 2-week 1.03 traded 1.3 billion euros at 7.35 on Wednesday. The Fed volatility risk premium helped lift 1-month to 7.6 from 7.0 on Wednesday and long term lows at 6.75 on Friday. Meanwhile, 1-month risk reversals regained 0.6 from 0.4 EUR puts over calls.

GBP/USD's 1-month expiry also now includes the Bank of England policy decision on March 20, which helped its implied volatility through 7.0 from 6.5 on Wednesday. GBP/USD implied volatility has been trading below historic volatility to highlight its value potential.

The AUD/USD curve edged higher from longer term lows on Wednesday, but may struggle to extend gains without a setback in spot.

USD/CNH implied volatility saw a minor increase, but quickly reverted to long term lows as realised volatility is expected to remain subdued within familiar ranges.

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