Hedge Funds Take Hawkish Fed Bait, Yen Positioning Exposed

Hedge funds dramatically shifted their positions in the Japanese yen and dollar ahead of the Federal Reserve's hawkish rate hike on September 15. The gross dollar long against eight IMM currency futures was slashed by 70% to a 15-month low of $5.9 billion, just before the Fed's decision triggered renewed dollar buying.

The yen saw a record two-week buying spree of 216k contracts, equivalent to around $17.3 billion, lifting the net yen long to a 14-month high of 120k contracts. However, this move was short-lived, as USDJPY surged towards 158 after the Bank of Japan's 25-basis-point rate hike.

In commodities, hedge funds responded cautiously to the energy sector's 9.4% surge, with some fresh buying of Brent crude while net selling in RBOB gasoline and ULSD contracts.