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Hedge fund yen short bets hit record high

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Hedge funds and other asset managers have upped their short wagers on the yen to record levels, with bets on the currency reaching 173,000 contracts as of 16 April, the highest level seen since 2006, according to a report by Bloomberg.

The report cites data from the Commodity Futures Trading Commission as revealing that the yen is also the most shorted among nine major currencies.

Meanwhile, growing speculation that Japan may intervene in the market to support the yen is putting pressure on investors to unwind so-called carry trades, which involve borrowing a currency cheaply to park money in higher-yielding assets. As with the Mexican peso earlier this month, that could trigger a plunge in value.

Japan’s wide yield gap with the US helped drag the yen down to its weakest in about 34 years against the dollar last week, prompting Japanese officials to warn that they may take action in the foreign-exchange market.

The reports quotes Koji Fukaya from Market Risk Advisory in Tokyo, in a research note: “Yen-selling positions have accumulated to high levels because of the investor conviction that monetary policy both in Japan and the US will remain unchanged for the time being”.

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