Yen optimism is spreading among hedge funds and asset managers as U.S. tariffs drive haven demand at a time when traders are reassessing the Bank of Japan’s interest rate hike path.

Leveraged funds were the most bullish since January 2021 and asset managers increased their long bets in the week through April 8 to the most positive on record in Commodity Futures Trading Commission data going back to 2006. The yen rose 2.3% against the dollar last week and hit its strongest level since September on Friday.

The yen has been one of the best performers against the dollar among its major peers this month as investors anticipate that the trade war launched by President Donald Trump may hurt global economic growth. Speculative traders switched to betting against the dollar and became the most short on the currency since October.

"This is an environment where risk will struggle and that will benefit safe havens like the yen,” said Skylar Montgomery Koning, a currency strategist at Barclays. "The yen is also attractive from a domestic standpoint, given the Bank of Japan is hiking and there seems to be a policy bias for a stronger currency.”

BOJ Gov. Kazuo Ueda expressed uncertainty about tariffs last week, while also reiterating that the bank will raise rates if its economic outlook is realized. Still, overnight index swaps show a 48% chance of a rate hike by the end of the year, compared with certainty earlier this month before Trump’s tariff announcement hammered global markets.