Hedge Funds Flip Net-Long the Yen for First Time Since July 2025 as Carry Trade Unwind Accelerates

Since U.S. and Japanese authorities jointly intervened to prop up the yen in late July, the currency has clawed back from multi-decade lows to its strongest levels since February. Now hedge funds have stopped betting against it entirely.

Commodity Futures Trading Commission data released Friday, Sept. 18, show leveraged funds held a net long position of about ¥251 billion ($1.6 billion) in the week ending Sept. 15, according to Bloomberg. Speculators have been net long the yen for the first time since July 2025.

The shift built fast. A week earlier, in the period ending Sept. 8, non-commercial traders swung from 92,227 contracts net short to 10,796 contracts net long, a move of more than 103,000 contracts in seven days, according to Startup Fortune's reading of CFTC data. The dollar fell as low as 152.89 yen that day, its weakest level against the yen since Feb. 17, according to MarketWatch. The Financial Times put the yen's September gain at roughly 4%.

What triggered the reversal

The positioning shift happened before anyone knew what the Bank of Japan would actually do. The CFTC's Sept. 15 snapshot cuts off three days before Governor Kazuo Ueda's board finished its two-day meeting on Sept. 18. Available reporting does not establish what the BOJ decided.

What moved markets was Ueda's tone going in. After the G20 finance ministers' meeting in Asheville, North Carolina, Ueda said the central bank would set policy "with upside inflation risks in mind" for the September meeting, according to Reuters, as cited by Startup Fortune. Hawkish remarks from Ueda and board member Hajime Takata triggered a rapid unwind of yen-funded carry positions, Bloomingbit reported, with the dollar-yen pair falling about 5% in the week through Sept. 8.

Going into the meeting, overnight index swaps priced roughly a 72% chance of a quarter-point hike to 1.25%, MarketWatch reported, while the Financial Times put the odds closer to 80%. Oxford Economics analysts wrote in an Aug. 31 note that they expect the BOJ's policy rate to reach 1.75% by next April, calling it "a higher policy rate projection and a faster pace than we previously anticipated."

The bond market backs up that inflation story. Japan's 10-year government bond yield topped 3% for the first time since 1996, and the 30-year hit a record near 4.17%, according to the Epoch Times.

Options traders are betting on a bigger move

The options market shows traders positioning for more than a modest pullback. Bloomberg reported the most actively traded dollar-yen option on the CME on Sept. 8 was a November put with a 142.86 strike, and year-end put volume ran more than three times call volume, favoring further yen strength.

Citi's global head of G10 FX trading, Jerry Minier, said "leveraged investors have been quite active," with option strategies targeting a break below 150 by year-end gaining popularity, according to Bloomingbit. Nomura's Graham Smallshaw said macro investors increased short dollar-yen bets after the pair broke below 155, with the market's target range now concentrated around 150 to 152.

Not everyone agrees the move sticks. TD Securities told Mitrade that if the BOJ leaves further hikes off the table for October and December, dollar-yen could snap back toward 157 to 160. James Athey, a fixed-income portfolio manager at Marlborough, told Mitrade that repatriation flows from Japan's public pension fund GPIF are also pulling money back into the yen, separate from any rate decision.

The stakes for U.S. tech stocks

A stronger yen threatens the carry trade that helped fund some of the AI-stock rally. Investors have spent years borrowing cheaply in yen to buy higher-returning dollar assets, including Treasurys and shares of Nvidia, AMD and Palantir, Startup Fortune reported. When the yen rises, those loans get more expensive to repay in dollar terms, forcing funds to sell assets to raise cash.

Treasury Secretary Scott Bessent has leaned into the moment publicly. He told CNBC's Sara Eisen on Aug. 31 that he had "information that the market doesn't have" about coordinated Japanese action, and separately told currency traders "I am the house now," according to Startup Fortune, daring them to short the yen. Japan's Finance Minister Satsuki Katayama said Tokyo and Washington remain aligned on foreign exchange policy and that Japan's stance hasn't changed since the joint intervention in late July, per Reuters.

That currency-specific weakness in the dollar sits awkwardly next to a broader trend. As reported previously, foreigners bought a net $1.75 trillion of long-term American securities over the 12 months through July, more than double the pace from Biden's final year in office. Breitbart has argued that framing this period as a flight from U.S. assets, as the New York Times did, misreads a shift toward buying more American stocks and corporate bonds rather than a wholesale dollar collapse. The yen move looks less like investors abandoning America and more like Japan's central bank finally playing catch-up on inflation after years near zero rates.

Whether the carry-trade unwind turns into forced selling in U.S. equities now hinges on what the BOJ actually delivered at its Sept. 17-18 meeting, information not yet reflected in the CFTC's most recent positioning data. The next CFTC report, covering the week the meeting concluded, will show whether hedge funds' bet on a stronger yen holds or gets reversed.