By Saqib Iqbal Ahmed
NEW YORK (Reuters) – Hedge funds’ positions on the Japanese yen shrank last week to the smallest net short position since February 2023, according to data released on Friday from the U.S. Commodity Futures Trading Commission and LSEG.
The net position for leveraged funds – typically hedge funds and various types of money managers, including commodity trading advisors (CTAs) – was 24,158 contracts short, compared to a net short position of about 70,000 contracts the week before, according to data from August 6 showed.
That’s the biggest change in weekly net holdings in the yen by hedge funds since March 2011, LSEG data show.
“This week marked the culmination of the biggest short squeeze in the yen in 17 years, with hedge funds and other speculators unwinding their bets against the currency at the fastest monthly pace since August 2007,” said Karl Schamotta, chief market strategist at payments firm Corpay.
“To paraphrase Mike Tyson, everyone has a plan until the yen hits them in the mouth,” he said, referring to the American boxer.
Global stock and bond markets, especially Japan, were rocked this week by the expiration of the hugely popular carry trade in the yen.
This business of borrowing the yen at a low cost to invest in other currencies and assets that offer higher returns is being offset by Japan’s interest rate hikes, a volatile yen and upcoming rate cuts in the United States and other economies.
The US dollar has fallen 9% against the yen over the past month.
