The yen’s summer revival entered a fourth day on Monday, putting it on track for the longest rally since February, as one of the biggest macro trades of the year continues to unwind.
The Japanese currency climbed as much as 1% to just below ¥132 per dollar. Hedge funds are selling down dollar positions and increasingly buying the yen as a haven play, according to Asia-based currency traders who asked not to be named as they’re not authorized to discuss client activity publicly.
Lowered expectations for Federal Reserve rate hikes as recession fears grow have led to a rally in Treasuries, narrowing the yield gap that had opened up between the U.S. and Japan, which had helped drive the yen to a 24-year low. That has weakened the argument behind one of the most prominent trades of the year — short the Japanese currency — and resulted in a more than 5% rebound from the yen’s mid-July low.