Yen's Shift in Fortunes Brings Bears Back from the Edge

The yen's fortunes are shifting after years of decline against the dollar, as several factors combine to make short-sellers rethink their bets.

A convergence of central bank policy, investment flows, and speculative positioning is adding to volatility in the currency markets.

Data from Citigroup shows that positioning on the yen has flipped from bearish to bullish since August 1, with leveraged funds, banks, and real-money investors all net buying yen this week.

Stephen Jen, CEO of Eurizon SLJ Asset Management, said the risk of a rapid unwind of yen-based carry trades is rising, similar to what was seen in 1998 when Long-Term Capital Management collapsed.