Bank of Japan's rate hike still fails to boost the yen; hedge funds re-establish short bets; long USD positions continue to increase.

Title context: Bank of Japan's rate hike still fails to boost the yen; hedge funds re-establish short bets; long USD positions continue to increase. Text: Although the Bank of Japan raised interest rates as scheduled last month, its policy stance failed to meet the market's expected level of hawkishness, and combined with the still significant interest rate differential between the United States and Japan, the yen continues to face depreciation pressure. The latest data from the U.S. Commodity Futures Trading Commission (CFTC) shows that hedge funds have re-established short positions in the yen, reversing the bullish bets accumulated over the previous two consecutive weeks. At the same time, speculative funds further increased long positions in the U.S. dollar and turned net short on the pound for the first time since 2024, reflecting strengthened bullish sentiment toward the dollar in the foreign exchange market. According to CFTC data, in the week ended September 29, the notional size corresponding to net short positions in the yen held by leveraged funds was approximately 210 billion yen (about $1.3 billion). Specifically, leveraged funds' net yen position shifted from a net long of 4,472 contracts in the previous week to a net short of 16,809 contracts, meaning the net position changed by 21,281 contracts in just one week, fully reversing the bullish positions accumulated over the prior two consecutive weeks. The yen has weakened against the U.S. dollar for a third consecutive week. Although Japanese government officials recently made comments on the continued pressure on the yen and its potential impact, they still failed to effectively reverse the yen's weak trend. The Bank of Japan raised interest rates last month as the market expected, but its policy remarks failed to convince traders that more aggressive tightening measures would follow. At the same time, a relatively large interest rate gap between Japan and the United States remains, continuing to put pressure on the yen. It is worth noting that different types of investors have shown clear divergence in their views on the yen. Although leveraged funds shifted back to shorting the yen, asset management institutions further increased their long positions in the yen. Data shows that in the week ended September 29, asset management institutions increased their net long positions in the yen by 9,463 contracts to 51,961 contracts, indicating that institutional investors have not yet formed a consensus view on the yen's future direction. At the same time, speculative funds' bullish sentiment toward the U.S. dollar further heated up. CFTC data shows that in the week ended September 29, leveraged funds increased bullish bets on the dollar while expanding net short positions in major currencies such as the euro and the Canadian dollar. Among them, net short positions in the euro increased by 23,640 contracts to 82,445 contracts; net short positions in the Canadian dollar increased by 23,396 contracts to 72,519 contracts. Changes in pound positioning are also noteworthy. Data shows that leveraged funds' net pound position shifted from a previous net long of 6,519 contracts to a net short of 5,377 contracts, the first turn to a net bearish stance on the pound since 2024. At the same time, the pound fell to a three-month low against the U.S. dollar this week, reflecting continued pressure on sterling recently. In other major currencies, leveraged funds reduced net long positions in the Australian dollar by 570 contracts to 55,114 contracts; reduced net short positions in the New Zealand dollar by 3,762 contracts to 1,454 contracts; and reduced net short positions in the Swiss franc by 1,603 contracts to 17,017 contracts. By contrast, the Mexican peso remained favored by some speculative funds, with net long positions increasing by 1,417 contracts to 80,677 contracts. From the perspective of position changes by asset management institutions, their attitudes toward major currencies also showed clear differences. In addition to increasing long positions in the yen, asset management institutions also increased net long positions in the euro by 487 contracts to 245,160 contracts. However, these institutions significantly increased bearish bets on the pound and the Australian dollar during the same period, with net short positions in the pound increasing by 11,740 contracts to 125,424 contracts and net short positions in the Australian dollar increasing by 17,845 contracts to 73,073 contracts. In addition, asset management institutions increased net short positions in the New Zealand dollar by 9,743 contracts to 21,228 contracts; increased net short positions in the Canadian dollar by 3,116 contracts to 25,949 contracts; and increased net short positions in the Swiss franc by 888 contracts to 36,411 contracts. As for the Mexican peso, asset management institutions sharply cut net long positions by 29,255 contracts to 16,251 contracts. Overall, the latest CFTC positioning data shows that the Bank of Japan's rate hike has not yet reversed the yen's weak trend, and the U.S.-Japan interest rate differential remains an important factor affecting the yen's performance. Against this backdrop, hedge funds have re-established short positions in the yen and further increased bullish bets on the U.S. dollar. However, asset management institutions continue to increase long positions in the yen, also showing that different types of investors still disagree on the yen's outlook. Whether the yen can stabilize in the future will still be affected by the Bank of Japan's subsequent policy stance, changes in the U.S.-Japan interest rate differential, and the overall trend of the U.S. dollar.