(HedgeCo.Net) One theme emerging in hedge fund portfolios is a bold bet on the Japanese yen. According to a Bloomberg article dated October 31, 2025, hedge funds are positioning for the yen to weaken to as low as ¥160 per US dollar by year-end. Bloomberg
Why the yen?
There are a few macro drivers: the Federal Reserve in the U.S. continues to maintain higher-for-longer interest rates while the Bank of Japan remains committed to ultra-loose monetary policy — pressuring the yen downward, ideally. This interest-rate differential is viewed by some funds as a compelling trade.
Hedge fund positioning
Funds see the yen short as a leveraged theme — riskier than some other trades, but with potentially significant payoff if the currency moves as expected. Given the scale of the targeted move (to ¥160), many funds are using FX forwards, options and other derivatives.
Risks and concerns
Of course the trade is not without risk. Currency markets can move rapidly on unexpected policy shifts, geopolitical shocks, or surprises from Japan’s economy. If the Bank of Japan signals tightening, the trade could reverse sharply. Liquidity in FX derivatives may also behave differently under stress.
Implications
If hedge funds largely succeed with this bet, it would reinforce the idea that active macro strategies (in global currencies, rates, commodities) are back in focus, after a quieter period in some corners of the hedge-fund universe. For currency heads and global macro investors, it’s a chance to show alpha.
Final word
The yen short trade is emblematic of the broader hedge-fund landscape in 2025: higher volatility, global macro themes gaining traction, and investors willing to back bold directional moves. Whether it pays off will depend on central bank policy and global economic surprises.