BNY analysts highlight historic JPY strength during rising US rate volatility and heavy speculative shorts raising squeeze risks.
Rising U.S. rate volatility is expected to drive demand for safe-haven currencies like the Japanese Yen, according to market analysis. The JPY has historically appreciated during such periods, contrasting with other low-yielding funding currencies that tend to depreciate.
Speculative positioning data shows near-record net short positions in the JPY, with shorts accumulating since April 2025. This divergence between real money defensiveness and fast money positioning could trigger a sharp squeeze if the Yen appreciates.
Analysts note that the JPY’s unique properties among funding currencies, combined with heavy short interest, create a potential trading opportunity. The Swiss Franc also faces similar positioning dynamics, though the JPY presents a clearer case for upside.