Hedge funds have executed a dramatic reversal in their yen positioning, shifting to a net long stance for the first time since July 2025, a move that underscores deep shifts in market sentiment following coordinated intervention efforts by U.S. and Japanese authorities.

According to data released by the Commodity Futures Trading Commission (CFTC) on Friday, leveraged traders cleared out their previous yen short positions during the week ending September 15 and began building bullish bets. Bloomberg-compiled figures show these funds now hold approximately 251 billion yen, equivalent to around $1.6 billion, in net long yen positions.

This positioning pivot comes just ahead of rate hikes from both the Federal Reserve and the Bank of Japan this week. However, the BOJ's forward guidance left some market participants who had anticipated a more aggressive tightening cycle disappointed, putting those newly bullish traders in a precarious spot. The yen tumbled as much as 1.3% on Friday before paring losses, settling near 156.80 against the dollar in New York trading. The Nikkei reported that the BOJ has been polling market participants on exchange rate levels, a step widely viewed as a precursor to official intervention.

Complete Reversal in Hedge Fund Stance

CFTC data reveals that leveraged traders fully unwound their yen short positions during the week ending September 15 and pivoted to a long bias, with positions reaching roughly 251 billion yen. This marks the first net bullish stance on the yen by hedge funds since July 2025, signaling a notable shift in overall market psychology.

The repositioning follows weeks after U.S. and Japanese authorities stepped into the currency market. Bloomberg previously reported that U.S. Treasury Secretary Bessent characterized American participation in yen intervention as "symbolic" while voicing support for U.S. export competitiveness.

Central Bank Policy Divergence Pressures Yen Bulls

The timing of the hedge fund pivot is particularly delicate. Both the Fed and the BOJ raised interest rates this week, but the BOJ's forward guidance failed to meet the expectations of some market participants who were looking for a clearer path of further hikes, putting downward pressure on the yen.

The yen's intraday decline on Friday reached as much as 1.3%. According to the Nikkei, the BOJ has been asking market participants about exchange rate levels, a move typically interpreted as an early warning sign of possible official intervention, and the yen trimmed its losses following the report.

Dollar Bullish Sentiment Also Fades

In parallel, speculative traders, including asset managers and non-commercial accounts, had reduced their net dollar long positions to the lowest level since March by September 15. Yet the dollar staged a powerful rebound later in the week, posting its largest weekly gain in three months, which added fresh pressure to those who had trimmed their dollar exposure.

The CFTC data offers investors a window into sentiment within the $9.5 trillion daily turnover foreign exchange market, reflecting the overall direction of positions built by hedge funds and asset managers through derivative instruments.