(Bloomberg) -- The dollar-yen’s short-term implied volatility surged over the past two days, illustrating how much the currency pair’s rapid decline caught option traders by surprise. 

The measure of the dollar-yen’s expected movement over two weeks, which includes the Bank of Japan’s policy decision on Dec. 19, has shot to a more than four-month high. Option traders have had to factor in the size of the currency pair’s swings on Thursday that showed a drop of as much as 3.8% at one point. 

Market speculation is growing that the BOJ may end its negative interest rate policy as soon as its policy meeting this month, following comments from BOJ Governor Kazuo Ueda Thursday, along with remarks from one of his deputies on Wednesday. Ueda told lawmakers in parliament that his job was going to get more challenging from the year-end. He later visited Prime Minister Fumio Kishida to discuss his monetary policy stance.

Hedge funds across Asia, Europe and the US used the BOJ commentary to pile into option trades that benefited from the yen advancing versus currencies such as the dollar, euro and Australian dollar. They are now left with the question of whether to take profits or leave the trades in hope the yen strengthens even further.

It’s a tough call because there’s no guarantee the BOJ will change its monetary policy this month, with economists in a Bloomberg survey seeing it more likely happening next year. More than two-thirds of the polled economists see the central bank scrapping its negative rate regime by April, with half of the 52 respondents saying it will happen that month. In the previous survey in October, 29% saw the move coming in April.

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