Bessent Brings House Money to Yen Battle
Treasury Secretary Scott Bessent has taken on traders, saying they can bet against him if they want. He claims to have inside knowledge of Japanese policy moves and wants to challenge anyone who thinks they can outsmart him.
Bessent's statement signals that Washington believes it has the upper hand in coordinating yen strength with Tokyo. This means betting against the yen is essentially betting against a counterparty with policy visibility that traders do not have.
Hedge funds are already positioned for the yen to strengthen sharply, with some targeting a move to 142.86 by November. The most active dollar-yen option on Tuesday was aiming for this price target.
A stronger yen can be problematic for investors who borrowed yen cheaply to fund dollar-denominated positions, including crypto. Rising Japanese bond yields also make yen assets more attractive, reducing the incentive to stay in the carry trade.