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Short yen bets are sticking due to the gap in the US-Japan interest rate path

The gap between US and Japanese interest rates means traders are still betting against the yen – even after authorities are likely to have intervened in recent weeks to prop up the beleaguered currency.

Hedge funds held more than 77,000 contracts tied to bets that the yen will fall in the week ending Tuesday, about twice as many as a year ago, according to data released Friday by the Commodity Futures Trading Commission. Asset managers increased bearish bets by about 6,500 contracts to nearly 60,000, marking the biggest increase since March, the data showed.

While volatility has eased in recent days, somewhat reducing the impetus for further forays into currency markets by officials, the gap between Japan’s ultra-low interest rates and U.S. yields, which have remained at 20-year highs, is keeping the press the yen. The currency is the worst performer among the group of 10 peers, falling about 12% over the past year. It is also the most shorted among the major currencies tracked by the CFTC, data compiled by Bloomberg shows.



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