Analysts suggest that the large accumulation of speculative short positions in the yen prior to Japan's latest market intervention could amplify the currency's rebound if traders begin to unwind those bets.

Data from the Commodity Futures Trading Commission (CFTC) released on Friday shows that net short positions held by asset managers and leveraged funds in the yen rose to their highest level in 2024 as of July 28. Hedge fund bearish bets on the yen remain near levels not seen since 2007, marking an increase in short positioning ahead of last week's coordinated intervention by the U.S. and Japan.

After the yen slumped to a nearly 40-year low against the dollar, authorities intervened over a weekend, reversing more than two months of decline within just two days. Measures included direct yen purchases in the market, official calls to banks trading the yen, and public statements from Japan's Finance Minister Masayuki Satsuki and U.S. Treasury Secretary Scott Bessent, who pledged support for Japan.

On Monday morning, the yen traded at 155.23 per dollar, its strongest level since early May. In a report, Masayuki Nakajima, senior currency strategist at Mizuho Bank, stated that if the recent signals from Japanese and U.S. authorities trigger a covering of these positions, the dollar-yen pair could have room to fall toward the 155 region. He added that a move toward 150 cannot be ruled out if speculative positions eventually turn net long on the yen.