Leveraged Funds Cut Yen Shorts Amid Japan's $85 Billion Intervention

Leveraged funds significantly reduced their yen short positions in the five weeks ending August 4, according to CFTC data. The net short contracts dropped by 74,400 to 63,600, one of the largest short-covering adjustments since the 2008 financial crisis. This reduction was part of a broader market adjustment after Japan's FX intervention.

The Japanese government bought approximately $85 billion worth of yen on July 30-31 to support the currency. This marked the largest two-day FX intervention since the 2011 Fukushima nuclear accident and the first coordinated intervention between Japan and the U.S. in 15 years. The yen had previously fallen to its lowest level since 1986.

At the end of June, leveraged funds held approximately 138,000 net short yen contracts, the highest level since 2007. This recent reduction in yen short positions suggests that market participants are adjusting their bets on the currency's value.