Commentary on behalf of Samira Farzad, Head of Business Development at HF Quarters, on hedge funds shifting to the Japanese Yen as a safe haven amid tariff tensions.
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Current developments have led hedge funds and asset managers to shift their positions and increase their exposure to the Japanese Yen. Leveraged funds hold their most bullish yen positions since early 2021, while asset managers have pushed long positions to the highest level on record. This shift in sentiment comes as U.S. tariffs raise concerns over global economic stability. Heightened tensions between the U.S. and China continue to reinforce the yen’s appeal as a defensive asset. In this environment, the yen remains well-positioned to benefit from risk aversion.
Market participants are also reacting to a divergence in policy expectations between the BoJ and the Federal Reserve. While the BoJ has indicated a cautious but persistent path toward policy normalization, the Federal Reserve faces mounting pressure to ease. Recent U.S. inflation data and signs of weakening domestic demand have increased expectations of rate cuts later this year. As a result, the yen could continue to draw investments from institutional market participants and away from other asset classes deemed more risky.
