Hedge Funds Cut shorts by most since Pandemic on Omicron Since Pandemic, Yen Shorts have been cut by Most.
Hedge funds slashed their bearish yen wagers by the most in 20 months last week as the spread of omicron boosted demand for haven assets.
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The biggest net contract purchase since March 2020 was cut by the hedge funds in the week ended November 30, according to the latest data from the Commodity Futures Trading Commission. Since hitting a near five-year low on November 24, the yen has strengthened more than 2% against the dollar.
The move coincided with a global shift out of risk assets into havens like the yen and Treasuries on the back of fears that the new strain will derail the global recovery. Westpac Banking Corp.'s Risk Aversion Index has gone up to the highest since February 2020.
The risks to the yen are on the upside while omicron concerns remain, Commonwealth Bank of Australia strategists including Kim Mundy wrote in a note. Safe haven status is a strong driver of the yen in times of heightened uncertainty. The reduction in bearish wagers has created room for speculators to pile up yen shorts, according to JPMorgan Chase Co.
The position data indicates the headroom for rebuilding yen shorts should market stresses be lessened and the focus should turn back to policy divergence, strategist Patrick Locke wrote.
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