Hedge funds are stepping up wagers that the Japanese yen is poised to break higher against the US dollar, after weeks of trading in a tight range around 147/USD, according to a report by Bloomberg citing recent data from derivatives exchange operator CME Group.
The figures show that leveraged funds have been building positions in put options – which profit if the dollar weakens versus the yen – with the most traded September strike at 144.93. On 26 August, dollar-yen put option volumes were four times higher than calls, reflecting a sharp rise in downside positioning.
The shift comes against a backdrop of political and policy turbulence. US President Donald Trump’s effort to oust Fed Governor Lisa Cook has raised expectations of accelerated Fed rate cuts, while turmoil in France has bolstered haven demand for the yen. Upcoming US payrolls and Japan wage data could add fuel to the trade, with stronger wages supporting a potential Bank of Japan rate hike.
The yen’s performance this week may hinge on whether Japanese wage growth continues to firm and whether US data reinforce the case for Fed easing – both potential catalysts for a breakout below 145.
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