Hedge Funds Flip Flop on Yen Option Trade as BOJ ‘Spooks’ Market

Hedge funds are backpedaling on yen option trades with a sudden spate of bullish bets on the currency, according to market participants.

Just last month leveraged funds piled into option bets that the yen would fall back to 160 versus the dollar. That changed this week with funds now buying yen call options, which gain in value if the currency rises versus the greenback.

The dollar-yen fell back below 155 on Tuesday after Bloomberg News reported that the Bank of Japan is likely to discuss the reduction of bond purchases as early as its policy meeting next week. The ...