- The report said hedge funds’ net short yen positions had fallen to one-eighth of their peak, weakening speculation on further yen weakness.
- It said structural yen-selling pressure remains in place because of higher crude prices, overseas investment, the new NISA program and the digital deficit.
- Analysts said the dollar-yen exchange rate could move back toward 160 depending on Bank of Japan comments, oil prices and changes in the international backdrop.
Forecast Trend Report by Period
Hedge funds’ net short positions shrink to one-eighth of peak
Monthly trading range narrows to the smallest in 4 1/2 years
Oil prices and overseas investment curb a rebound
“Has the yen really bottomed this time?”
The yen’s monthly trading range against the dollar has narrowed to its smallest in 4 1/2 years. Hedge funds have sharply cut yen-selling positions as the US and Japan push back against yen weakness. At the same time, structural demand to sell the yen remains because of overseas investment and crude imports. The opposing forces have left the foreign-exchange market at a standstill.
Hedge funds’ net short-yen positions fall to one-eighth of their peak
The dollar-yen exchange rate traded between the low 156-yen range and the high 158-yen range in October, Nikkei reported on November 2. The monthly trading range was 2.87 yen, the smallest in 4 1/2 years.
The backdrop was a retreat in speculative yen selling. Data from the US Commodity Futures Trading Commission showed hedge funds’ net short yen positions stood at about 14,000 contracts as of the 27th of last month, equivalent to about 180 billion yen. That was down to roughly one-eighth of the peak of about 115,000 contracts in late June.
In the first half of fiscal 2026, hedge fund selling helped push dollar-yen above 160. More recently, that pressure has eased.
A key factor was action by the US and Japanese governments. The two countries coordinated yen-buying intervention in July. US Treasury Secretary Scott Bessent has also repeatedly pushed back against yen weakness, telling speculators: “Try me.”
Comments under Sanae Takaichi’s administration also shifted sentiment. There were remarks that this was not a phase that called for so-called reflation policies. That weakened the market view that the government would tolerate yen weakness and stand in the way of the Bank of Japan’s monetary-policy normalization. Teppei Ino, chief analyst at Mitsubishi UFJ Bank, said hedge funds can no longer move to sell the yen on a half-baked idea.
There was no clear resurgence in yen selling even after the Bank of Japan concluded its monetary policy meeting on the 30th of last month. Takumi Naya, head of the foreign-exchange trading group at Sumitomo Mitsui Banking Corp., said yen selling had strengthened after such meetings in the past, but not this time.
Exporters are also changing their approach. Companies that had been waiting for dollar-yen to rise into the 160-yen range have started selling dollars and buying yen in the 157-yen range. The shift suggests a growing view that the exchange rate may not return to 160.
Overseas investment and higher oil prices remain yen-negative
Risk aversion is also supporting the yen. Political and fiscal uncertainty in France, along with volatile trading in US artificial-intelligence shares, has renewed the yen’s appeal as a haven asset. Further declines in US stocks and interest rates could lead to additional yen strength.
Even so, yen buying is not strong enough to pull dollar-yen down to the 150 level. Importers still need dollars because of higher crude prices. Structural pressure to sell the yen also remains because of overseas investment through the new NISA tax-free investment program and Japan’s digital deficit.
Shogo Kariya, a strategist at Minato Bank, said yen selling could easily reemerge if the Bank of Japan signals it may slow the pace of rate hikes from the current roughly once every three months. He expects dollar-yen to return to around 160 by year-end.
Another variable is the possibility of renewed tensions between the US and Iran. Yujiro Goto, chief foreign-exchange strategist at Nomura Securities, said a further rise in crude prices would initially tend to spur dollar buying. In that case, both the yen and the euro could weaken against the dollar.
For now, the yen is set to trade in a narrow range as buying and selling pressures offset each other. Still, if the stalemate persists, energy could build in the market, setting the stage for larger moves on any policy shift or change in international conditions.
Choi Man-su, Tokyo correspondent, Korea Economic Daily bebop@hankyung.com