Short yen bets hit near one-year high by leveraged funds, ignoring bullish calls from investment banks

Zhitong Finance APP learned that speculators’ bearish positions on the yen rose to the highest in nearly a year, as the market bet that the Federal Reserve will raise interest rates, and the yen continued to decline against the dollar. Leveraged funds’ net short positions in the yen rose by 10,986 contracts to 53,706 contracts in the week to May 23, the highest since last June, according to the U.S. Commodity Futures Trading Commission (CFTC). The yen fell more than 3 percent against the dollar in May, the third-worst performer among G10 currencies.

Speculators ramp up bearish bets on yen

While major central banks have been raising interest rates to curb inflation, the Bank of Japan has maintained ultra-loose policy, with new Governor Kazuo Ueda repeatedly saying he will patiently continue monetary easing.

While the divergence in monetary policy has weighed on the yen, some investment bank strategists see the yen as undervalued and signaled a trend reversal as they see the possibility of the Bank of Japan starting to tweak its yield curve control policy in the coming months.

UBS expects the Bank of Japan to adjust its yield curve control policy sometime between July and October, which would lead to a 15 percent appreciation in the yen by the end of the year. Societe Generale expects the yen to appreciate 7% in the coming weeks.

Source: Zhitong Finance Network