Hedge funds turned the most bearish on the yen in more than a year just as the currency was in the midst of a two-week rally.
(Bloomberg) — Hedge funds turned the most bearish on the yen in more than a year just as the currency was in the midst of a two-week rally.
Leveraged funds increased their net-short position on the yen by 3,582 contracts to 58,099, the largest level since May last year, according to data from the Commodity Futures Trading Commission for the week through July 11.
The increase came in the midst of the yen’s two-week rally, which saw the currency strengthen about 4% against the dollar as US inflation cooled faster than expected and traders unwound a profitable carry trade. Hedging against the risk the Bank of Japan will tweak its yield curve control policy at its meeting next week further supported the currency.
The yen may continue to gain this week amid broad US dollar weakness and a Japanese inflation report that’s unlikely to reduce market bets on a change to the BOJ’s YCC policy, Commonwealth Bank of Australia strategists including Joseph Capurso wrote in a note to clients.
An unwinding of extreme short yen positions can further weigh on the dollar-yen pair, they said in the note dated Monday. Hedge funds have been short the yen since 2021, with the positions more than doubling this year.
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