Hedge funds are upping bets that the Japanese yen could weaken toward 165 per dollar before authorities intervene, defying renewed warnings from Tokyo as the currency trades near multi-month lows, according to a report by Bloomberg citing data from the the Depository Trust and Clearing Corp (DTCC).
Options market activity shows strong demand for structures that benefit from further gains in USD/JPY, even as Japan’s finance minister and top currency officials reiterated concerns after the yen slid to its weakest level in 18 months. Political uncertainty has added to the momentum, with Prime Minister Sanae Takaichi’s plans for a snap election raising expectations of continued expansionary policies should the ruling Liberal Democratic Party secure a fresh mandate.
Market participants report sustained interest in leveraged options designed to profit from yen weakness while accounting for the risk of central bank action. According to traders, hedge funds are targeting the 160–165 range as a potential trigger point for intervention.
DTCC data shows call options on USD/JPY — which rise in value as the dollar strengthens — outnumbered put options by more than two to one in large notional trades, underscoring a bullish bias toward the pair. The imbalance persisted into Thursday, despite USD/JPY approaching levels that previously prompted intervention by Japan’s Ministry of Finance in mid-2024.
Some investors have begun adding downside protection through put options, reflecting caution around potential market action. Japan’s last intervention episode saw the currency strengthen sharply over two days, with USD/JPY falling as much as 2.6% from its peak.
