Asset managers have significantly increased their short positions on the Japanese Yen. The currency is at risk of sliding to levels last seen in 1986, with bearish traders seemingly unfazed by the possibility of government intervention to support Japan’s embattled currency. Some experts suggest that a slump as far as 170 yen per dollar (approximately 10 yen from current levels) is possible due to continued selling of the yen in favor of the higher-yielding greenback. The key driver behind these bearish bets is the substantial interest rate gap between Japan and the US, with the Federal Reserve maintaining higher rates compared to the Bank of Japan. Despite warnings from Japanese authorities, short-term intervention efforts have had limited impact, and the path of least resistance appears to be further weakness in the yen. Hedge funds and asset managers have been actively participating in this trend, doubling their net short position since the start of the year. The yen’s renewed slump toward fresh 34-year lows reflects this sentiment. While Japan remains prepared to intervene if necessary, the broader market dynamics continue to favor yen weakness
Asset Managers have built the largest Japanese Yen short position in history pic.twitter.com/dlnfLjnvv2
— Win Smart, CFA (@WinfieldSmart) June 25, 2024
BREAKING: USD relative to Japanese Yen has just had its highest close since Dec 1986 pic.twitter.com/GMTsH9peaR
— Game of Trades (@GameofTrades_) June 24, 2024