The path of the Fed and the Central Bank may reverse, and Hedging funds are boldly bullish on the yen

Asset managers have turned bullish on the yen for the first time since May amid growing speculation that the Central Bank of Japan may end its ultra-loose policy in 2024. The latest data from the Commodity Futures Trading Commission also showed a slight reduction in Hedging funds' bearish bets on the yen in the week ended Dec. 19. Sumitomo Mitsui Chief FX Strategist Hirofumi Suzuki said: "Asset managers are likely to continue to hold long positions in the yen, although the Central Bank of Japan did not make a policy change in December and the market is still speculating that it may act at the January monetary policy meeting. "The position reversal reflects growing expectations for a US rate cut and the Central Bank of Japan ending negative Intrerest Rate over the data period. The USD-JPY risk reversal indicator also suggests that traders are hedging against a stronger yen.