Yen Traders Caught in ‘Mass Square-Up’ Following Takaichi Win

A large part of yen selling Monday was macro hedge funds closing bullish bets, referred to as “squaring up,” rather than establishing new bearish ones, according to traders from Nomura International and Citigroup Inc.

While some funds entered new positions by buying the dollar against the yen, many more were simply buying the greenback to exit existing short greenback positions, said traders in Asia. This happened in reaction to the pair rising by as much as 2% amid expectations that Sanae Takaichi’s win may mean more fiscal expansion, and a slower pace of interest rate hikes for the Bank of Japan.