By Saqib Iqbal Ahmed
NEW YORK (Reuters) – The Japanese yen position of leveraged funds shrank in the past week to its smallest net low position since February 2023, U.S. Commodity Futures Trading Commission and LSEG data showed on Friday.
As of Aug. 6, the net low position of leveraged funds — typically hedge funds and various types of fund managers, including commodity trading advisors (CTAs) — was 24,158 contracts, compared with about 70,000 contracts in the previous week.
This is the biggest change in weekly net yen positioning by leveraged funds since March 2011, according to LSEG data.
“This week was the culmination of the yen’s biggest short squeeze in 17 years, with leveraged funds and other speculators exiting bets against the currency at the fastest monthly pace since August 2007,” said Karl Schamotta, chief market strategist at payments company Corpay.
“To paraphrase Mike Tyson, everyone has a plan until the yen hits them in the face,” he said, referring to the American boxer.
Global stock and bond markets, particularly those in Japan, have been rocked this week by the withdrawal from the hugely popular yen carry trade.
This trade, which involves borrowing yen at low costs to invest in other currencies and assets offering higher yields, is being battered by rising interest rates in Japan, yen instability and looming rate cuts in the United States and other economies.
Over the past month, the US dollar has lost 9% of its value against the yen.
