Written by Saqib Iqbal Ahmed
NEW YORK (Reuters) – Leveraged funds’ net short positions in the Japanese yen shrank to their smallest net short position since February 2023 in the latest week, data from the U.S. Commodity Futures Trading Commission and the London Stock Exchange showed on Friday.
Data through Aug. 6 showed that net short positions of leveraged funds — typically hedge funds and various types of money managers, including commodity trading advisers — were short about 24,158 contracts, compared with a net short position of about 70,000 contracts the previous week.
This is the biggest change in weekly net yen positions by leveraged funds since March 2011, data from the London Stock Exchange showed.
“This week saw the peak of the biggest pressure on the yen in 17 years, with leveraged funds and other speculators liquidating their bets against the currency at the fastest monthly pace since August 2007,” said Karl Schamuta, chief market strategist at payments firm Corpay.
“To use Mike Tyson’s phrase, everyone has a plan until the moment the coin hits him in the mouth,” he said, referring to the American boxer.
Global stock and bond markets, especially Japanese ones, have been rocked this week by the unwinding of the popular yen carry trade.
This trade, which involves borrowing yen at a low cost to invest in other currencies and assets that offer higher returns, is being hit hard by interest rate hikes in Japan, the volatility of the yen, and impending interest rate cuts in the United States and other economies.
The US dollar has fallen 9% against the yen over the past month.