Hedge Funds Turn Bullish on Japanese Yen for First Time in Over a Year

Hedge funds have reversed their stance on the Japanese yen, establishing a net bullish position for the first time in over a year amid heightened volatility following interest rate hikes from both the U.S. Federal Reserve and the Bank of Japan. The shift marks a significant reversal from a long-held bearish consensus on the currency.

A Major Shift in Positioning

Data from the U.S. Commodity Futures Trading Commission (CFTC) for the week ending September 15 shows a decisive change in sentiment among speculative investors.

• Leveraged funds swung from a net short position of 53,255 contracts to a net long position of 20,069 contracts.
• This represents a total bullish wager of approximately ¥251 billion ($1.6 billion), according to media calculations based on the CFTC data.
• It is the first time these funds have held a collective net long position on the yen since July 2025.

This trend was mirrored by large asset managers, who also significantly increased their bullish bets. They expanded their net long yen positions by 54,179 contracts, bringing their total to 54,821 contracts. CFTC data is a key indicator used by market participants to gauge positioning in the global foreign exchange market, where daily turnover averages about $9.5 trillion.

Central Bank Policies Test New Bets

Ad

The positioning change occurred as both the Federal Reserve and the Bank of Japan tightened monetary policy. The Fed raised its target rate by 25 basis points to a range of 3.75%-4.00%, while the BOJ guided its overnight call rate to around 1.25%.

However, the BOJ's policy signals were less aggressive than some investors had anticipated, placing immediate pressure on the newly established long yen positions. The yen fell as much as 1.3% against the U.S. dollar on Friday, trading near 156.80 by the New York close, testing the conviction of traders betting on its appreciation.

Intervention Watch Resumes

The yen's renewed weakness has reignited speculation about further official intervention. The Bank of Japan has reportedly been inquiring with market participants about current exchange rate levels—a step often seen as a precursor to direct action in the currency market. This follows joint intervention by U.S. and Japanese authorities just weeks ago to support the yen.

At the same time, speculative positioning against the U.S. dollar had recently fallen to its lowest level since March. The dollar's sharp rally this week—its largest weekly gain in about three months—suggests that traders who simultaneously reduced dollar longs while buying the yen may be facing pressure from the market's contrary move.