Hedge funds are stacking bets that the Japanese yen keeps climbing, with options positioning pointing to a dollar-yen rate below 150 by year-end and, in some longer-dated trades, as low as 140.
That positioning reaches well past currency desks. Cheap yen borrowing has bankrolled years of leverage across global risk assets, and Bitcoin (BTC) has buckled before when that funding grew expensive.
Options Desks Crowd Into Yen Upside
Chicago Mercantile Exchange (CME) Group data shows the most-active dollar-yen contract on Tuesday was a November put option with a strike price of 142.86. Puts expiring by year-end outnumbered calls by more than three to one. Puts gain value as the dollar slips.
The dollar-yen pair fell almost 5% in the week through Tuesday before recovering part of the move, Bloomberg reported. Investors rushed to close yen-funded carry trades as the currency strengthened.
The turn came fast. Three weeks ago, the pair sat near 159, and Japanese investors were still adding to carry positions.
They net bought more than 5 trillion yen of foreign assets in the two weeks to August 15. Rising Japanese inflation has since pushed the trade the other way.
Hawkish signals from Bank of Japan Governor Kazuo Ueda and board member Hajime Takata triggered the shift. The pair then broke 155, a level that had survived the Ministry of Finance’s intervention in May.
The pair traded near 153.44 on Wednesday. It is down just 2.1% for the year.
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What a Stronger Yen Would Mean for Bitcoin
Crypto has absorbed the move so far. Bitcoin held near $78,848 on Wednesday, up 0.26% over 24 hours. The asset survived a similar shock only days ago.
The risk lies in the mechanics. A stronger yen raises the cost of repayment for investors who borrowed yen to fund dollar-denominated crypto positions.
At the same time, rising Japanese bond yields make yen assets more attractive, further weakening the incentive to maintain the carry trade. If both moves accelerate, investors could be forced to unwind positions and sell risk assets.
Nomura reports macro funds now concentrating on the 150 to 152 zone, with 12-month structures reaching toward 140. Whether Bitcoin stays insulated may rest on how quickly the Bank of Japan validates those bets at its September decision.
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