As the Bank of Japan raises interest rates, hedge funds turn bullish on the yen for the first time in over a year.

Hedge funds' stance on the yen has undergone a major shift, turning net long on the currency for the first time since July 2025, reflecting a deeper change in market sentiment following market intervention by U.S. and Japanese authorities. According to Bloomberg, data released by the U.S. Commodity Futures Trading Commission (CFTC) on Friday showed that in the week ended September 15, leveraged traders had cleared their previous short positions in the yen and begun building bullish positions. Bloomberg-compiled data showed that the funds now hold about 251 billion yen (about $1.6 billion) in long yen positions. The shift in stance occurred before the Federal Reserve and the Bank of Japan raised interest rates in succession this week. However, the BOJ's messaging disappointed some market participants betting on continued rate hikes, leaving traders who had turned bullish facing a passive situation. The yen fell as much as 1.3% on Friday before paring losses, trading at about 156.80 per dollar late in New York. According to Nikkei, the Bank of Japan has been asking market participants about exchange rate levels, a move often seen as a precursor to official intervention. Hedge funds complete position reversal CFTC data showed that leveraged traders completely closed their short yen positions in the week ended September 15 and instead built long positions worth about 251 billion yen. This is the first time since July 2025 that hedge funds have held a net bullish stance on the yen, marking a significant shift in market sentiment. The turn came weeks after U.S. and Japanese authorities intervened in the market. According to Bloomberg, U.S. Treasury Secretary Bessent previously said that U.S. participation in yen intervention was a "symbolic" move and expressed support for U.S. export competitiveness. Central bank policy divergence weighs on bulls The timing of the hedge funds' position reversal was delicate. Both the Federal Reserve and the Bank of Japan raised interest rates this week, but the BOJ's forward guidance failed to meet some market participants' expectations for a further rate hike path, pressuring the yen. The yen's intraday decline widened to as much as 1.3% on Friday. According to Nikkei, the Bank of Japan asked market participants about exchange rate levels, a move usually interpreted as a warning signal before official intervention, and the yen pared losses after the news. Dollar bullish sentiment also cools At the same time, speculative traders including asset managers and non-commercial traders had cut net long dollar positions to the lowest level since March as of September 15. However, the dollar then rebounded strongly this week, posting its biggest weekly gain in three months, putting pressure on traders who had reduced dollar holdings. The CFTC data provides investors with a window into sentiment in the foreign exchange market, where average daily turnover reaches $9.5 trillion, reflecting the overall positioning direction established by hedge funds and asset managers through derivative instruments. This article is reprinted from "Wallstreetcn"; GMTEight editor: Li Fo.