Speculators cut their bets in favor of a rise in the yen against the dollar, slashing their positions by 42% this week to a net $2.7 billion as of Feb. 21, government data showed Friday.
Speculative traders on the Chicago Mercantile Exchange held a net 17,257 contracts betting that the yen will appreciate, according to the Commodity Futures Trading Commission's weekly report on the commitments of traders. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.
In the last two weeks, the yen has weakened by more than 4% against the dollar. The Japanese currency, which has shown record strength in the year since Japan suffered from a massive earthquake, tsunami, and nuclear crisis last March, saw a selloff after the Bank of Japan said it would buy a further Y10 trillion of bonds to shore up the Japanese economy.
"We've seen a lot of people gradually reducing their longs in yen, partly due to the macro outlook," said Charles St-Arnaud, a vice president of foreign exchange research at Nomura Securities International in New York. He noted that the Bank of Japan's more accommodative monetary policy, combined with better economic data out of the U.S., is causing the moves.
Speculators held firm to their dollar positions, wagering just 1% more, a net $15.2 billion, that the dollar will rise.
Similarly, traders barely altered their view on the euro, the data showed, holding a net $23.5 billion in wagers that the single currency will fall, down 4% from the previous week. That represented a net 142,159 contracts.
The Australian and New Zealand dollars, both of which have net positions indicating that traders think they will appreciate, also saw their holdings remain essentially the same this week.
For the Swiss franc, investors held a net $2.7 billion in bets that the currency will fall against the dollar, or 19,846 contracts. That was down 26% from the previous week.
Traders' net position betting against the U.K. pound, valued at $3.1 billion, fell by 22% this week. Speculators increased their wagers in favor of the Canadian dollar nearly by half, to a net $1.4 billion.
The CFTC's weekly report shows speculative investors' positions in major currencies held against the dollar. It viewed the markets as of Tuesday.
-By Chana R. Schoenberger, Dow Jones Newswires; 212-416-4803; firstname.lastname@example.org; @djfxtrader
-Stephen L. Bernard contributed to this article.