US-Japan Intervention Sends Yen Bears Scrambling

The latest COT report has highlighted the extreme bearish positions that futures traders had taken on the Japanese yen and euro, leading up to the recent volatility. The US and Japan have since confirmed a coordinated intervention to support the yen, marking their first joint operation since 2011.

The MOF's intervention has lent credibility to the rebound in the yen, with Treasury Secretary Scott Bessent suggesting that the US could facilitate future interventions by expanding the Fed's repo facility. This signals that the US is prepared to support Japan's efforts, strengthening the case that the yen may have bottomed.

According to the COT report, large speculators had reached a record high of $48.5 billion in bullish bets on the US dollar heading into the FOMC meeting. Meanwhile, net-short exposure to the euro reached a 20-month high among large speculators, while gross short positions on the yen neared their record highs.