The Japanese yen exchange rate is stuck in a deadlock, and I see hedge funds preparing to bet big on the yen breaking 145!

Updated on 2025-09-01 06:23

Reviewer Alison Ho

I have recently been paying attention to the USD/JPY trend, as this currency pair has been consolidating around 147 for a whole month. To be honest, it has been extremely boring. However, interestingly, data from the Chicago Mercantile Exchange shows that a group of leveraged players is quietly building positions in the options market, betting that the yen is about to break free from this dull trend and surpass the 145 mark!

When did hedge funds become so aggressively betting on the yen? I noticed that on August 26, the trading volume of USD/JPY put options was actually four times that of call options! The most popular were those put options with a strike price of 144.93, expiring in September. What news have these big players caught wind of?

"France may hold a no-confidence vote, and news events such as Trump and Cook undermining each other have finally rekindled hedge funds' interest in bearish options for the USD/JPY," said Mukund Daga, head of Asian foreign exchange options at Barclays.

Graham Smallshaw from Nomura Securities also observed the same phenomenon: "Since Powell spoke at Jackson Hole, bearish bets on the USD/JPY have suddenly increased, with the fast money crowd having repositioned, particularly focusing on strategies expiring in 1-2 months."

I believe there are several potential catalysts for the strengthening of the yen: Trump wants to get rid of Federal Reserve Governor Cook, pressuring the central bank to cut interest rates; the political situation in France is chaotic, stimulating demand for safe havens; and if the upcoming U.S. non-farm payroll data is not ideal, the market's expectations for the Federal Reserve's easing policy will surely become even stronger.

In addition, Japan will release labor cash income data on Friday, September 5. If it shows a good momentum in wage growth, the Bank of Japan may further raise interest rates. Kazuo Ueda also mentioned during the Jackson Hole meeting that the tight labor market may continue to push wages higher.

Moreover, if the U.S. non-farm data released on Friday reveals that the labor market is softening, the dollar will definitely come under pressure again, which is great news for the yen!

Anyway, I think the boring trend of the USD/JPY is coming to an end. The big players are secretly preparing, just waiting for a breakout of that narrow range. Perhaps we will soon see an exchange rate below 145.

* This article only represents my personal opinion, and you should never use it as an investment basis! It is best to consult a professional advisor before investing to ensure you understand the risks. Contracts for difference have leverage, which may cause you to lose all your money. It is not suitable for everyone, please invest cautiously.

Source: DepositPhotos