US-Japan Intervention Sparks Sharp Yen Short Position Unwind

Hedge funds have significantly reduced their bearish bets against the Japanese yen following a joint intervention by US and Japanese authorities. The move saw net short positions in yen futures and options cut by more than half in just five weeks, from nearly 138,000 contracts at the end of June to around 59,526 contracts by August.

The intervention was the most sizable since 2011, with Japan purchasing an estimated $75 to $85 billion worth of yen over two days. The trigger for this move was a weak yen, which had been hovering near 40-year lows against the US dollar.

What made this intervention different from past solo efforts by Japan was the explicit backing from Washington. Treasury Secretary Scott Bessent publicly supported the action, and US authorities signaled willingness to use Fed facilities to defend the yen.