Options traders are preparing for turbulent yen trading.

Fluctuations are likely to increase amid growing concerns the Japanese authorities will intervene to support the weakening currency. At the same time, the yen may come under upward pressure amid speculation of a potential tweak to the Bank of Japan’s monetary policy and escalation of the Israel-Hamas conflict, said Tsutomu Soma, a bond and currency trader at Monex Inc.

One-month dollar-yen butterfly positions, which reflect views of the likelihood of large swings in the currency pair over that period, touched their highest level since November last year. This reflects the market’s view that the Japanese currency may run into a rocky period, after staying in a tight range over the past couple of weeks.

“The yen has been stagnant just below the 150 area versus the dollar recently and any move up or down would be big,” Tokyo-based Soma said. “A decline beyond 150 may further increase the risk of intervention, while a sudden escalation in the Middle-East conflict may boost demand for havens.”

Added to that, volatility may increase in the run-up to the Bank of Japan’s policy meeting at the end of the month, Soma said.

With the yen hovering near the weakest in three decades, Finance Minister Shunichi Suzuki sent a warning on Friday, saying he told his Group of 20 counterparts that there are cases when appropriate responses are required in the currency market.

Japan spent over ¥9 trillion ($60 billion) in three occasions to stop the yen’s decline in September and October last year.

The yen touched 150.16 versus the dollar on Oct. 3, then suddenly spiked to 147.43, stoking speculation the authorities had stepped in to support it. The Japanese currency has been relatively stable since then, but the butterfly spread began to rise late last week when tensions in the Middle East increased.

The yen has lost more than 12% versus the greenback so far this year, the worst performance among its Group of 10 peers, as the BOJ hangs onto the world’s last negative interest rate regime.

The widening yield gap with the US has undermined the yen, boosting import prices and fueling inflation that has already been above the central bank’s target of 2% since April 2022. All that has fueled speculation the BOJ may move away from ultra-low rates sooner rather than later.

(Updates rates and adds last year’s intervention amount.)