Latest data from the U.S. Commodity Futures Trading Commission (CFTC) shows that hedge funds have turned bullish on the Japanese yen for the first time since July 2025. This shift comes just weeks after U.S. and Japanese authorities stepped into the market to support the yen, and leveraged money is now betting on further yen strength as expectations around the policy path evolve.
During the week ending September 15, leveraged funds completely unwound their previous net short yen positions and began establishing long positions in the currency. Data compiled by media outlets from CFTC figures shows these funds now hold approximately ¥251 billion (about $1.6 billion) in yen appreciation-related positions. In terms of contract counts, leveraged funds swung sharply from a net short of 53,255 contracts to a net long of 20,069 contracts, signaling a clear reversal in speculative sentiment toward the yen. This marks the first time hedge funds have turned collectively bullish on the yen since July 2025.
This positioning shift is noteworthy because CFTC data reflects how investors utilize derivatives to position themselves in the global foreign exchange market, which sees average daily trading volume of roughly $9.5 trillion. The figures provide an important reference for observing the currency expectations of hedge funds and asset management institutions.
Against the backdrop of hedge funds turning bullish on the yen, both the Federal Reserve and the Bank of Japan implemented rate hikes this week. The Fed raised its federal funds rate target range by 25 basis points to 3.75%-4.00%. The Fed stated that U.S. economic activity continues to expand at a solid pace, though inflation remains elevated, and this policy adjustment aims to bring inflation back to the 2% target in a more timely manner.
The Bank of Japan also announced adjustments to its monetary market operations on September 18. According to the BOJ's official website, following the policy adjustment, the central bank will guide the uncollateralized overnight call rate to remain around 1.25%. However, the BOJ's policy signals did not fully meet the expectations of some market participants. Certain investors had hoped for a clearer hint from the BOJ regarding future rate hikes, which has put short-term pressure on funds that had positioned early for yen appreciation.
On Friday, the yen fell as much as 1.3% against the dollar before paring losses, trading near ¥156.80 per dollar by the New York close. In other words, despite hedge funds having already shifted significantly toward yen longs in advance, the BOJ's less-decisive-than-hoped signals on future hikes have left this bet temporarily under strain.
Meanwhile, continued yen weakness has once again drawn market attention to the possibility of official intervention. Reports indicate that the Bank of Japan has been surveying market participants about current foreign exchange rate levels. Such inquiry activity is typically viewed by markets as a potential preliminary step before formal intervention. This development is particularly noteworthy because U.S. and Japanese authorities had already taken action to support the yen just weeks ago. Should the yen resume rapid depreciation, traders will be especially attuned to whether Japanese officials step back into the market.
It is not just leveraged funds showing increased yen conviction. Large asset management institutions have also significantly boosted their bets on yen appreciation. During the week ending September 15, asset managers increased their net long yen positions by 54,179 contracts, bringing total net longs to 54,821 contracts. This indicates that different types of institutional money have been raising their bullish yen exposure recently.
By contrast, positioning changes in other major currencies have been more mixed. Leveraged funds increased net short euro positions by 4,974 contracts to 51,355; reduced net long sterling by 21,663 contracts to 18,698; and increased net long Australian dollar positions by 10,920 contracts to 59,299. Meanwhile, net short Canadian dollar positions fell by 15,448 contracts to 41,404, while net long Mexican peso positions rose by 7,946 contracts to 90,125.
On the asset manager side, net long euro positions decreased slightly by 906 contracts to 275,565, net short sterling positions fell by 17,119 contracts to 88,959, and net short Canadian dollar positions dropped significantly by 21,287 contracts to 8,846.
Importantly, alongside the rapid build-up in yen longs, speculative money had also been reducing its bullishness on the U.S. dollar. As of September 15, speculative positioning-including asset managers and non-commercial traders-turned to its least bullish stance on the dollar since March of this year. Yet the dollar's subsequent movement stood in sharp contrast to this positioning shift, with the greenback surging this week to post its largest weekly gain in roughly three months. This suggests that traders who had trimmed dollar longs while rotating into yen positions may face short-term headwinds as market moves diverge from their positioning.
From a broader perspective, this week's CFTC data reflects a notable shift in the foreign exchange market: after the yen had long been suppressed by U.S.-Japan interest rate differentials, institutional investors are now placing greater emphasis on the potential support stemming from Japan's monetary policy normalization and official FX intervention.
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