Yen Short Bets Hit Nine-Year High as Carry Trade Returns

Speculators have boosted their short bets against the yen to a nine-year high, signaling the revival of the yen carry trade despite intervention risks and a potential rate hike by the Bank of Japan on Tuesday.

The net short position on the yen has surged to levels not seen since 2017, according to the latest CFTC data. This reflects a renewed appetite for the carry trade, where investors borrow yen at low rates to invest in higher-yielding currencies. The move comes even as the BOJ is expected to raise interest rates at its upcoming meeting, which would normally support the yen. However, the persistent interest rate differential between Japan and other major economies continues to favor carry trades.

For interest rate and central bank policy traders, the revival of the yen carry trade highlights the market's conviction that the BOJ's tightening cycle will remain gradual and insufficient to close the rate gap. The large short positioning also raises the risk of a sharp yen rally if the BOJ surprises with a larger hike or if intervention materializes. On NowPrice, live rates and charts show the yen's reaction to these dynamics in real time.

Looking ahead, the BOJ's decision on Tuesday will be the key catalyst. A hawkish outcome could trigger a short squeeze, while a dovish hold would likely reinforce the carry trade. Traders should also watch for any verbal intervention from Japanese officials, which could temporarily stem yen weakness. The nine-year high in short bets underscores the market's bearish conviction, but also the vulnerability to sudden reversals.