Mrs Watanabe stays sceptical of strong yen, piling up short bets

On September 16, Japanese retail investors are maintaining sizable short positions in the yen, anticipating that recent gains will be temporary. The yen reached a seven-month peak against the dollar last week, prompting speculative traders to switch to long positions as the Bank of Japan's tightening policy became more apparent.

However, domestic investors, commonly known as "Mrs. Watanabe," remain skeptical of the yen's future, with their short bets amounting to 2.886 trillion yen ($18.58 billion) as of the end of August, which represents more than half of the global total of 4.1 trillion yen, according to SMBC Nikko Securities estimates. If the yen's value rises further, these positions could be liquidated, potentially accelerating the currency's appreciation.

Analysts suggest that the yen may strengthen further if the Federal Reserve maintains interest rates or adopts a dovish stance while the Bank of Japan remains hawkish.