Yen's Changing Fortunes Spook Bears as BOJ Rate Hike Looms

The yen's fortunes may be changing, as several factors are now giving short speculators cause to rethink their long-term bets against the Japanese currency.

A host of tailwinds, including capital repatriation, unwinding carry trades and US political pressure, have contributed to a shift in market psychology around the yen.

Data from Citigroup indicate positioning on the yen has flipped from bearish to bullish since August 1st, with interbank flow data showing leveraged funds, banks and real-money investors all net buying yen this week.

The convergence of central bank policy, investment flows, and speculative positioning is adding to volatility. The yen is set for a 2.3% surge against the US dollar this week, the most since a rare joint US-Japan intervention at the end of July.