Anna 
December 25: In a notable shift, asset managers are displaying bullish sentiments towards the yen, marking the first such inclination since May. The surge in optimism stems from a rising speculation that the Bank of Japan might terminate its ultra-easy policy in 2024. The most recent data from the Commodity Futures Trading Commission, covering the week ending December 19, indicates a subtle reduction in bearish wagers on the yen by hedge funds.
Hirofumi Suzuki, Chief Foreign Exchange Strategist at Sumitomo Mitsui Banking Corporation, commented on the evolving scenario, stating, “Asset managers appear inclined to maintain long positions in the yen. Despite the Bank of Japan refraining from policy adjustments in December, the market continues to engage in speculative discussions regarding the upcoming monetary policy meeting in January. Actions are expected.” This reversal in positioning mirrors the escalating anticipation of U.S. interest rate cuts and the potential termination of negative interest rates by the Bank of Japan within the data period.
Further underlining this shift, the USD-JPY risk reversal indicator indicates that traders are strategically hedging against the prospect of a strengthened yen.
