Hedge Funds Bet Big on Japanese Yen Amid US-Japan Rate Hikes

Hedge funds have shifted their stance on the Japanese yen, going from net short positions to net long positions for the first time since July 2025. As of the week ending September 15, leveraged funds held approximately JPY 251 billion (about USD $1.6 billion) in yen-appreciation-related positions.

This significant shift in positioning is noteworthy as it indicates that hedge funds are betting on further yen appreciation. The Bank of Japan and the Federal Reserve raised interest rates this week, with the Fed increasing its target range for the federal funds rate by 25 basis points to 3.75%, 4.00%, while the BoJ aimed to keep the uncollateralized overnight call rate around 1.25%.

However, despite hedge funds' bullish bets on the yen, the Bank of Japan's policy signals fell short of some market participants' expectations, putting temporary pressure on those who had previously bet on a stronger yen. The yen fell as much as 1.3% against the US dollar before paring its losses, trading around 156.80 per dollar at the close in New York.