Hedge Funds Increase Bearish Yen Bets to 19-Month High

According to Yahoo News, hedge funds have raised their bearish yen wagers to the highest level since April 2022, as speculation grows that the Bank of Japan (BOJ) is unlikely to adopt a hawkish stance. Leveraged funds' net yen shorts increased by 2,833 to 65,611 contracts as of November 28, according to the latest data from the Commodity Futures Trading Commission. Japan's currency appreciated nearly 4% from a recent low of 151.91 per dollar set on November 13 to 146.23 on Monday, the strongest since mid-September. Goldman Sachs Group Inc. strategists, including Kamakshya Trivedi, wrote on Friday that they still believe yen strength is approaching its limits and should be faded, as long as the US appears to be achieving a soft landing and the BOJ remains reluctant to signal an imminent hiking cycle. This sentiment from hedge funds adds to indications that investors see yen weakness becoming more entrenched, even though overnight-indexed swaps are pricing in an end to the BOJ's negative-rate policy by June. Japanese life insurers have recently reduced currency hedging by the most in over a decade, signaling a diminishing concern of a yen rebound that would erase returns from overseas assets. BOJ Governor Kazuo Ueda stated last month that the bank will continue with monetary easing patiently to support the domestic economy.