Hedge Funds Double Down on Yen, Betting on Revival and Global Impact

Hedge funds are shifting from record-high short positions to an unprecedented net long position in the yen, driven by a complex interplay of market forces. The move reflects narrowing interest rate spreads between the U.S. and Japan, the Bank of Japan’s tightening monetary policy, and declining confidence in the dollar’s safe-haven status. A stronger yen could trigger unwinding carry trades, capital reallocation, and ripple effects across global markets.