Hedge funds bet yen will strengthen past 150 by year-end

Hedge funds are piling into options that profit from a stronger yen, wagering that the dollar-yen pair will fall below 150 by the end of 2026, with some traders targeting levels as low as 140 through longer-dated derivatives.

The most actively traded dollar-yen option on Tuesday was a put expiring in November with a strike price of 142.86, according to CME Group ↘ 1.09% data cited by Bloomberg. Total put volume on contracts expiring by year-end was more than triple that of calls, underscoring the lopsided bearish positioning against the dollar.moneycontrol+1

A Break Below 155 Emboldens Bears

The yen surged to a seven-month high against the dollar on September 8, touching 152.89 — its strongest level since February — after falling nearly 5% against the dollar in the preceding week. The breach of the 155 level, a support threshold that held even during Japan's Ministry of Finance intervention in May, has drawn a wave of new short positions from macro funds.reuters+3

"Leveraged investors have been active and reacting to a potential regime change in the currency," said Jerry Minier, global head of linear G-10 FX trading at Citigroup ↘ 0.71% in London. "Option structures targeting dollar-yen below 150 by year-end have been popular."moneycontrol

At Nomura ↘ 0.19%, senior FX spot trader Graham Smallshaw said demand for downside options had intensified since the pair broke 155, with the near-term consensus targeting the 150-to-152 range. Some traders are using digital options and spreads to position for moves as deep as 140 over the next 12 months.bloomberg+1

BOJ Hawkishness and Bessent's Challenge

The yen's rally has been fueled by converging forces. Bank of Japan Governor Kazuo Ueda signaled in early September that the central bank would give greater weight to upside inflation risks, reinforcing expectations of a rate hike at the September 17-18 policy meeting. Hawkish board member Hajime Takata separately called for "nimble" rate increases, saying 2026 marks a turning point for Japanese monetary policy.japantimes+2

On the U.S. side, Treasury Secretary Scott Bessent has publicly encouraged yen strength, telling traders on Tuesday to try to counter his efforts to bolster Japan's currency — and noting that his market calls now effectively carry inside information. Bessent had previously signaled expectations that Tokyo and the BOJ would act to support the yen, following a rare joint U.S.-Japan intervention in July.wikipedia+2

Carry Trade Unwind Deepens

The rapid move has rattled participants in the yen carry trade, which involves borrowing cheaply in yen to invest in higher-yielding currencies. Reuters reported that the yen's sudden strength was spurring an unwinding of these positions, with the pair reversing from around 160 less than a week earlier. The yen's resilience following a robust U.S. payrolls report has further emboldened bulls, according to Citigroup's Minier, who said the currency shrugged off data that would normally support the dollar.reuters+1