Hedge Funds Renew Bearish Bets on Yen Ahead of Japanese Election

As Japan approaches a crucial election this weekend, hedge funds are renewing their bearish bets against the yen, anticipating further weakening. According to Jin10, the options market reflects this shift. Data from the Depository Trust & Clearing Corporation shows that on Tuesday, the trading volume of dollar-yen call options valued at $100 million or more surpassed that of similar put options. With the increased demand for call options, the premium for hedging against a dollar-yen decline over the next month has dropped to its lowest level in nearly two weeks. Antony Foster, head of G-10 spot trading at Nomura International in London, noted, "Now that the market has stabilized somewhat and the extreme bubble in the precious metals market has subsided, hedge funds are increasingly returning to arbitrage and 'carry trade.' With the Japanese election this weekend, the market feels the dollar-yen will reach higher levels, especially if the election results are favorable."