Hedge investors are betting more heavily against the yen than they have since April 2022, speculating that the Bank of Japan (BOJ) will not take a hawkish posture. The most recent data from the Commodity Futures Trading Commission shows that as of November 28, leveraged funds’ net yen shorts climbed by 2,833 to 65,611 contracts. From a recent low of 151.91 per dollar recorded on November 13 to 146.23 on Monday—the best level since mid-September—Japan’s currency increased by about 4%.
Kamakshya Trivedi and other analysts at Goldman Sachs Group Inc. wrote on Friday that they continue to think that the yen is strengthening towards its limit and should be eased, provided that the US appears to be making a soft landing and the BOJ is reluctant to announce an impending cycle of rate hikes. Hedge fund attitude is consistent with signs that investors believe the yen’s weakness is solidifying, although overnight-indexed swaps are pricing in the BOJ’s negative-rate policy to terminate by June. The largest currency hedging reduction by Japanese life insurers in over a decade has occurred recently, indicating a waning fear of a yen resurgence that would wipe out earnings from overseas holdings.