Hedge funds have continued reducing their bearish bets against the yen, signaling a cooling of negative sentiment following the historic joint intervention by the United States and Japan. Data from the Commodity Futures Trading Commission (CFTC) released on Friday showed that for the week ending August 11, net short positions on the yen held by leveraged funds fell by 6.5% to 59,526 contracts.

Since the US and Japanese authorities jointly intervened to support the yen around the start of the month, these funds have slashed their net short yen positions by more than half. The yen has weakened roughly 1% this week, closing at 159.35 in New York on Friday, recovering a significant portion of the gains driven by the official intervention.

This has kept market participants on alert for further intervention and the possibility of a hawkish shift in Bank of Japan policy. "The market was heavily short the yen and got caught off guard by the shift in circumstances. Faced with these rising risks, investors naturally cut back their positions," said Paresh Upadhyaya, a strategist at Pioneer Investments.

The CFTC data provides a glimpse into sentiment in the $9.5 trillion-a-day foreign exchange market, showing how hedge funds and asset managers are positioning themselves through derivatives. Elsewhere, hedge funds increased their bullish bets on the British pound, pushing optimism to its highest level since February.

Net short positions on the New Zealand dollar grew to the highest since CFTC records began in 2006. Meanwhile, these funds' bullishness on the Mexican peso reached its highest level since June 2024. Hedge funds, asset managers, and other speculative investors also trimmed their long dollar bets, reducing the total to approximately $36.8 billion.