Since the historic joint intervention by the United States and Japan, hedge funds have significantly reduced their bearish bets on the yen, indicating a softening of negative market sentiment toward the currency. Data from the Commodity Futures Trading Commission (CFTC) released last Friday showed that for the week ending August 11, the total number of yen short contracts held by leveraged funds decreased by 6.5% to 59,526 contracts. Overall, since the two authorities coordinated efforts to support the yen around the end of July, hedge funds have slashed their yen short positions by more than half.
However, the yen depreciated by about 1% this week, closing at 159.35 in New York last Friday, erasing a significant portion of the gains triggered by the official intervention. This has kept market participants on high alert for potential further intervention by Japanese authorities and a hawkish shift in the Bank of Japan's policy stance.
"Given the market's previously massive short positioning in the yen, which left it vulnerable, investors naturally trimmed positions in the face of rising risks," said Paresh Upadhyaya, a strategist at Pioneer Investments. The CFTC data provides a snapshot of sentiment in the $9.5 trillion daily foreign exchange market, revealing the positions built up by hedge funds and asset managers through derivatives.
In other currencies, hedge funds increased their bullish bets on the British pound, pushing net long positions to their most optimistic level since February of this year. Short bets on the New Zealand dollar rose to the highest level since CFTC records began in 2006, while bullish sentiment toward the Mexican peso reached its strongest level since June 2024. Overall, hedge funds, asset managers, and other speculators reduced their net long dollar positions to approximately $36.8 billion.
Below is a breakdown of major currency positioning changes:
Leveraged Fund Net Position Adjustments:
- JPY net short decreased by 4,107 contracts to 59,526
- EUR net short increased by 4,622 contracts to 77,671
- GBP net long increased by 3,683 contracts to 42,722
- AUD net long increased by 7,737 contracts to 45,727
- NZD net short increased by 3,246 contracts to 34,031
- CAD net short decreased by 9,822 contracts to 92,487
- CHF net short increased by 1,854 contracts to 14,061
- MXN net long increased by 8,568 contracts to 76,408
Asset Manager Net Position Adjustments:
- JPY net short decreased by 18,530 contracts to 24,215
- EUR net long increased by 9,607 contracts to 254,320
- GBP net short decreased by 7,307 contracts to 120,070
- AUD net short increased by 7,754 contracts to 43,097
- NZD net short decreased by 4,730 contracts to 29,247
- CAD net short increased by 2,227 contracts to 104,250
- CHF net short decreased by 1,445 contracts to 38,322
- MXN net long increased by 8,686 contracts to 34,186
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