Hedge Funds Bet Against Yen Despite Rate Hike Fears

The Bank of Japan's (BOJ) rate hike in September to 1.25%, a 31-year high, failed to alter carry trade logic as hedge funds flipped back to yen shorts in just two weeks.

According to data from the U.S. Commodity Futures Trading Commission (CFTC), leveraged funds held net short yen positions with a notional value of approximately ¥210 billion ($1.3 billion) by the week ended September 29, after previously turning net long for the first time since mid-2025.

The speed and extent of this reversal are notable, particularly given the ostensibly yen-positive news in recent weeks, including the BOJ's rate hike and warnings from U.S. President Donald Trump and Japanese officials about yen weakness.