Hedge funds are ramping up bearish bets on the Japanese yen, with several large macro managers positioning for the currency to fall as low as JPY160 to the dollar before year-end, according to a report by Bloomberg citing data from the Depository Trust & Clearing Corporation (DTCC).
Trading in call options that profit from dollar strength against the yen surged on Thursday, with volumes six times higher than put options, the DTCC’s data shows. Calls with a notional value exceeding $150m changed hands as investors bet on continued divergence between Federal Reserve and Bank of Japan policy paths.
The BOJ this week kept rates unchanged and offered few signals on tightening, while the Fed cut rates but warned that further easing in December is not guaranteed. The contrast has encouraged macro hedge funds to extend short-yen positions.
The use of reverse knock-out (RKO) and digital options — structures that reduce premium costs or deliver fixed payouts on hitting specific levels — reflects growing conviction in a weaker yen while accounting for potential BOJ or Ministry of Finance intervention near key thresholds.
Analysts at Amundi said dollar-yen could trade up to 160 should it breach 155, while Societe Generale’s Thomas Bureau noted increased demand for short-term knockout options “as the preferred choice for tactical, short-term protection.”
Japan’s Finance Minister Satsuki Katayama said Friday that the government was monitoring currency moves “with a high sense of urgency,” as the yen traded between JPY153.65 and JPY154.17 in Asian trading.
