Hedge funds halved short bets on yen since joint intervention

[TOKYO] Hedge funds further dialled back on their wagers against the yen, signalling a reduction in negative sentiment surrounding the currency after the US and Japan’s historic joint intervention. 

The sum of contracts tied to leveraged funds’ short bets on the yen declined 6.5 per cent to 59,526 in the week ended Aug 11, according to Commodity Futures Trading Commission (CFTC) data released Friday (Aug 14).

In all, the funds have more than halved their short position against the Japanese currency since authorities coordinated around the turn of the month to support the yen. 

The yen weakened about 1 per cent this week to trade at 159.35 late in Friday’s New York trading session, wiping out a hefty chunk of the gains spurred by the official action. That leaves market participants on edge for further intervention and a hawkish shift in Bank of Japan policy. 

“With the market caught offside with large short yen positioning, it’s only natural for investors to trim their positions in light of these growing risks,” said Paresh Upadhyaya, a strategist at Pioneer Investments.

CFTC’s figures offer investors a glimpse into sentiment in the US$9.5-trillion-a-day foreign-exchange market, showing how hedge funds and asset managers are positioned using derivatives. 

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Elsewhere, the funds added to bullish bets on the pound, building the most optimistic position on the currency since February. Their short bets against the New Zealand dollar increased to the most in CFTC data going back to 2006. They also turned the most bullish on the Mexican peso since June 2024.

Hedge funds, asset managers and other speculators trimmed their bullish dollar wagers to about US$36.8 billion. BLOOMBERG