The Japanese yen surged on Monday, extending last week’s sharp gains as traders and hedge funds continued to unwind bearish positions amid growing expectations that Japanese authorities could intervene again to support the currency, according to a report by Reuters.
The yen strengthened by as much as 1% against the US dollar during Asian trading, briefly reaching its strongest level in roughly three months before easing slightly. It also appreciated against the euro and sterling, reinforcing speculation that official action could once again be influencing the foreign exchange market.
Latest positioning data from the US Commodity Futures Trading Commission (CFTC) showed that net short yen positions held by asset managers and leveraged funds reached their highest level since 2024 in the week ending 28 July. Hedge funds’ overall bearish exposure remained close to its most extreme level since 2007.
The heavy concentration of short positions has become a key focus for macro investors following last week’s joint intervention by Tokyo and Washington—the first coordinated action of its kind in 15 years—which helped drive a rapid rebound in the yen. Japan’s finance ministry confirmed the joint intervention, while central bank data indicated authorities may have purchased close to $59bn worth of yen in a single day, marking one of the largest interventions in recent years.
Currency strategists said the scale of existing short positions leaves the market vulnerable to a squeeze. If hedge funds continue to reduce bearish exposure, the dollar could fall further against the yen, with some analysts suggesting the currency pair could move towards the 150 level if speculative positioning eventually shifts to a net long stance.
The yen has spent several years under pressure as the Bank of Japan’s gradual approach to tightening monetary policy left Japanese interest rates well below those of other major economies, encouraging investors to fund carry trades in yen. Analysts continue to argue that longer-term currency strength will depend not only on monetary policy but also on measures that encourage Japanese investors to repatriate overseas assets.
The stronger yen weighed on the US dollar more broadly. The euro climbed to its highest level in around six weeks, while sterling remained close to recent highs. Commodity-linked currencies also benefited, with the Australian and New Zealand dollars advancing.
The dollar was also pressured by easing geopolitical tensions after US President Donald Trump said planned military action against Iran had been called off in favour of renewed diplomatic talks, helping to reduce demand for traditional safe-haven assets.
Attention now turns to Friday’s US non-farm payrolls report, a key event for global macro managers. The employment data is expected to play an important role in shaping expectations for Federal Reserve policy ahead of September’s meeting, with investors watching closely for signs of either continued labour market resilience or a slowdown that could strengthen the case for interest rate cuts.
