Traders are trimming their bets on a yen rally after policy meetings of the U.S. Federal Reserve and Bank of Japan cast doubts on how quickly the rate differentials between the United States and Japan may narrow.
Prior to last week's back-to-back meetings, strategists were betting that 2025 would be the year for the yen. But the market is now feeling less optimistic on the yen’s outlook after BOJ Gov. Kazuo Ueda opened up the possibility of waiting longer for the next hike, while the Fed signaled a slowdown in the pace of monetary easing next year.
Options metrics suggest that traders were the least bullish on the yen in a month after the meetings. Leveraged funds also raised their net short position on the yen to some 44,926 contracts, the most since July just before macro volatility roiled global currency markets, according to the latest Commodity Futures Trading Commission data for the week ended Dec. 17.
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