Hedge Funds Rebuild Yen Shorts as Carry Trade Returns

Leveraged funds have turned bearish on the Japanese yen again after briefly flipping net long, rebuilding short positions into the end of September.
The move signals renewed interest in the yen carry trade, where investors borrow low-yielding yen to fund purchases of higher-yielding assets elsewhere.
The positioning also creates unwind risk. A crowded yen short can reverse rapidly if the currency strengthens, potentially forcing leveraged positions to unwind across global markets. The August 2024 episode showed how quickly yen-driven deleveraging can spill beyond Japan and into global equities.