Yen Speculators Turn Net Long as USD/JPY Holds Near Seven-Month Low

Speculative positioning in the Japanese yen has flipped to net long for the first time since February, marking a sharp change after months of bearish positioning.

CFTC data showed non-commercial traders holding a net long position of 10,796 yen futures contracts. A week earlier, the same group had been net short by 92,227 contracts.

The shift comes as the yen trades near its strongest level against the U.S. dollar in seven months.

USD/JPY was around 153.49 in early trading on September 14, after falling to 152.89 the previous week. The yen has gained roughly 4% so far this month.

Contents

01

Rate Expectations Drive the Positioning Shift

02

USD/JPY Faces a Key Test

03

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Rate Expectations Drive the Positioning Shift

The change in futures positioning has developed alongside growing expectations for another Bank of Japan rate increase.

A 25-basis-point hike at the upcoming meeting is now almost fully priced into the market. That has helped narrow the gap between Japanese and overseas rate expectations and provided support for the yen.

The U.S. side of the pair remains active as well. Markets are pricing an 86% probability of a Federal Reserve rate increase this week following stronger inflation data. Despite higher U.S. yields, the dollar has struggled to build sustained gains against the yen.

USD/JPY Faces a Key Test

The positioning data shows that sentiment toward the yen has changed quickly, but much of the expected Bank of Japan move is already reflected in current pricing.

That leaves the next direction of USD/JPY dependent less on whether rates rise and more on what the central bank signals about further tightening.

A stronger indication that additional hikes remain possible could keep pressure on USD/JPY. A more cautious message, by contrast, could trigger some unwinding of the yens recent gains.

For now, the move from a large speculative short position to a net long one marks one of the clearest changes in yen positioning seen this year.

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