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The yen carry trade blow-up is soo early August. But the damage it caused is still to fully emerge. A good clue on the severity came out from the Commodity Futures Trading Commission on Friday.
The US regulator collects weekly data on positioning in various currency futures contracts, broken down by type of reporting entity. It’s obviously not comprehensive — and offsetting positions can radically alter the picture — but the CFTC’s “non-commercial trader” category is a decent gauge of overall investment fund positioning in various financial markets.
Data released on Friday evening show a pretty chunky shift in Japanese yen futures.
Bloomberg’s take on this is that hedge funds have “turned bullish” on the Japanese yen, which is a bit like saying they turned bullish on GameStop in January 2021.
People are definitely more bullish on the Japanese yen now, but this more like a primal scream of margin calls, short-covering, and wrecked P&Ls to us. That’s a near-200,000 contract swing in a matter of weeks, leaving non-commercial traders net long yen futures for the first time since 2021.
Where do things go from here? No clue! But here is Goldman Sachs’ note on the yen carry trade from last week, which the bank’s analysts have kindly made public for FT Alphaville readers.