The Bank of Japan’s intervention to prop up the yen this week comes as hedge funds and asset managers have built up large short positions against the currency. With billions of dollars on the line, many say they are staying put for now.
The yen has fallen victim to the remarkably strong dollar this year, reaching its weakest level against the US currency in 24 years on Thursday just before the BoJ’s move. It has been losing value since the start of the year, a move that accelerated after the Federal Reserve signalled its intention to implement rate rises at one of the fastest clips in years.
That weakness has attracted bets from investors wagering the yen still has further to go. And despite the BoJ’s attempt to strengthen the currency, investors and analysts said they do not expect a massive unwinding of the short positions any time soon.