(Bloomberg) -- The Bank of Japan’s policy decision due Wednesday is shaping up to be the biggest risk for the dollar-yen pair since the global financial crisis, with traders betting on a possible swing of 2% or more in favor of either currency.

The pair’s overnight implied volatility jumped to the highest since November 2008 as traders positioned for another policy tweak following a surprise move in December. Since the BOJ raised the ceiling for its yield curve control program last month, traders have turned up the heat on the central bank by pushing the 10-year bond yield above its ceiling for three straight days.

The impact of another shift in BOJ policy would be felt across the globe, with the move likely to spur a jump in the yen and trigger a rise in global bond yields. If the central bank stands pat, dollar-yen is expected to rally as investors positioned for a change will look to cover their short positions.

Economists are near unanimous in anticipating that the BOJ will maintain its ultra-loose monetary policy and its yield curve control. But conviction on this forecast has been waning since the BOJ’s surprise move in December, and traders acknowledge the possibility for another adjustment on Wednesday.

“There is an underlying feeling of there is no clean way for the Bank of Japan to get out of the sticky situation they’re in,” said Simon Harvey, head of foreign-exchange analysis at Monex Europe Ltd. 

“Markets are saying that if something is going to happen tomorrow, the easiest way to express this is that there’s going to be substantial volatility,” Harvey said. “We don’t know where, or in what direction, but overall volatility will be higher and we are happy to play that.”

Yen swings against other currencies also also increasing, with euro-yen one-day volatility rising to 47.58%, a level last seen in July 2016. Liquidity for short-dated yen options was worsening and spreads were widening, according to a Europe-based trader. 

Highlighting the possibility of erratic moves, dollar-yen’s overnight volatility level suggests there is a 70% probability the currency pair will trade in a 125.12-132.29 range on Wednesday, compared with around 129 on Tuesday.

--With assistance from Naomi Tajitsu and Vassilis Karamanis.

(Updates with economist forecasts in fourth paragraph, analyst comments in fifth and sixth)

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