Hedge Funds Have Never Been as Bullish on Yen as They Are Now

Updated on
  • Japan's currency has gained 11 percent versus dollar in 2016
  • Rally persists while central bank adopts negative-rate plan

Hedge funds and other large speculators have never been more bullish on the yen.

Positions that benefit from gains by Japan’s currency exceeded those that benefit from from losses by a net 66,190 contracts in the week ended April 12, a report from the Commodity Futures Trading Commission showed Friday. That’s the most in data going back to 1992.

Traders are buying as the the Bank of Japan, which has taken steps to spur economic growth, appears reluctant to intervene to reverse strength in the yen. The BOJ’s surprise Jan. 29 decision to adopt negative interest rates has failed to rein in the currency’s almost 11 percent rally this year.

"This is the effect of having negative rates," said Fabian Eliasson, head of U.S. corporate foreign-exchange sales in New York at Mizuho Financial Group Inc. "Ever since they moved, there’s just been the trend to buy yen and also as the volatility has been high, it’s a safe haven currency so that also leads to more yen buying. "

Japan’s currency has gained this year in defiance of the consensus on Wall Street at the start of 2016. The median forecast among analysts surveyed by Bloomberg in early January was for the yen to weaken to 124 per dollar by the end of March.

Japan’s currency added 0.6 percent to 108.76 per dollar in New York Friday.