Is the Japanese yen finally bottoming out and ready to pump? Wall Street hedge funds are "buying the dip on the yen" betting on an increase in the Exchange Rate.

Hedge funds are heavily positioning in the options market for the appreciation of the yen, as political and monetary policy divergences drive the dollar-yen interest rate trades into free fall (Background: The Bank of Japan's ultra-hawkish stance: rates should be raised to at least 1% by 2025, and the yen has surged past 152, hitting a two-month high) (Background Supplement: Japanese financial group Monex Group plans to issue a yen stablecoin, with FSA approval expected as early as this autumn) Amid the long-standing market consensus of a "strong dollar," the yen has recently experienced a sudden momentum shift against the dollar. According to CME options data from August 26, the trading volume of put options for the dollar-yen pair is four times that of call options, indicating that hedge funds are betting on yen appreciation through the options market. The most actively traded put option with a strike price of 144.93 expiring in September was priced significantly below the spot level of 147.05 at that time, highlighting the market's strong belief in the dollar's weakness. The options market is releasing a rare bearish signal for the dollar. Mukund Daga, Standard Chartered's head of Asian forex options, stated that hedge funds' interest in "USD/JPY put options" has surged, not from short-term speculation, but as a systematic asset reallocation. Graham Smallshaw, a senior trader at Nomura Securities, also observed that after Federal Reserve Chairman Powell's speech at Jackson Hole, "the market has shown a significant interest in the dollar-yen downtrend." Funds are not just buying simple put options but are also enhancing leverage through digital options and bear spreads, making this positioning a market consensus. "This is a rare one-sided flow, indicating that smart money is preparing for the yen to break free from long-term stagnation," said Daga. Political noise from Washington weakens the dollar. The first force driving the yen's appreciation comes from uncertainties in Washington. Former President Trump has attempted to influence the Federal Reserve's independence, even suggesting the replacement of board member Lisa Cook, raising market doubts about the dollar's credibility. The CME FedWatch Tool shows that the probability of a rate cut in September has exceeded 80%, significantly narrowing the dollar's interest rate advantage. Nasdaq reports that concerns about the Fed's independence continue to pressure the dollar. The second force comes from Europe. The French government is struggling with fiscal tightening policies, and its ruling prospects are precarious. Experts believe that if a political vacuum emerges in France, European assets may face capital outflows, prompting investors to increase their holdings in yen and gold as safe-haven assets. The divergence in monetary policies between the US and Japan reshapes interest rate trades. While the dollar faces rate cut pressure, the Bank of Japan is gradually signaling tightening. President Kazuo Ueda pointed out at Jackson Hole on August 23 that a tight labor market is driving steady wage increases, implying that further rate hikes are not out of reach. This suggests that the long-standing logic supporting the dollar-yen interest rate trade is loosening, and position-closing pressure may accelerate the yen's appreciation. The market is now focusing on Japan's labor cash income data on September 5 and the US non-farm payroll report on the same day. If Japan's data is strong while the US data is weak, it will simultaneously strengthen the policy contrast of "yen rising, dollar falling." Technically, several analysts are watching the 145 level for the dollar against the yen; if it breaks down, the next target may fall in the 142-144 range. VT Markets cited Goldman Sachs' recommendation to short the dollar-yen with a target price set at 142. The implications of portfolio recalibration Once the yen enters a path of appreciation, long-term investors relying on interest rate differentials may face significant losses and be forced to adjust their positions. For Japanese companies, the currency rebound will lower import costs, benefiting domestic stocks such as retail and food; overseas capital may reassess the weight of Japan's stock market in global investment portfolios. More broadly, global capital may shift from high-interest differential currencies to a new balance that emphasizes safety and macro stability. The yen's recent "awakening" is the result of a confluence of political risks, policy divergences, and momentum in the options market, also serving as a warning against the past mindset of "one-sided pursuit of dollar returns." In the coming weeks, the actions of the US and Japan's central banks, along with key economic data, will determine whether this trend can continue; regardless of the outcome, the power dynamics in the currency market have begun to shift, and investors must quickly recalibrate their compass in response to this structural change. Related reports: Don’t believe Ethereum will hit $15,000 by year-end? Analysis of Tom Lee’s predictions: It’s quite possible within three years. Standard Chartered reiterates Ethereum's potential to surge to $7,500 by year-end: ETH buying remains undervalued, and price pullbacks should be a time to enter. Trend analysis: Can Ethereum (ETH) lead Bitcoin in this cycle? SharpLink is very optimistic. (Is the yen finally hitting bottom and about to rise? Wall Street hedge funds are "buying the dip in yen" heavily betting on currency appreciation.) This article was first published in BlockTempo, the most influential blockchain news media.