Hedge Funds Cut Yen Bets Amid BOJ Caution on Further Rate Hikes

Hedge funds have sharply reduced their bullish yen bets after the Bank of Japan raised interest rates but offered few indications that further tightening would come quickly.

According to a report by Bloomberg, Commodity Futures Trading Commission data shows that leveraged funds held a net long position equivalent to about JPY55.9 billion ($355 million) in yen in the week to 22 September, a reduction of almost 80% from the previous week.

This repositioning followed the BOJ's 17 September decision to raise interest rates as expected, but the accompanying signals were viewed by markets as offering limited evidence of an imminent acceleration in monetary tightening.

The yen weakened following the BOJ decision, with the currency reaching around JPY157.39 to the dollar by the 22 September CFTC reporting date, compared with JPY155.11 a week earlier.