US dollar momentum turned sharply higher last week, with DXY posting its strongest weekly gain since July 2025 as speculative shorts came under pressure. Yet COT positioning also shows the case for yen longs may be building, particularly if rising Japanese yields continue to narrow yield differentials and weigh on USD/JPY.
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US Dollar Positioning Turns Bullish as Yen Risks Build
Large Speculator Positioning from the COT report
Source: CFTC (COT), LSEG
- US Dollar: Traders effectively reduced their net-long exposure by $2.6 billion from the prior week to $3.6 billion, down 77% from its $16.7 billion peak eight weeks ago.
- EUR/USD: Net-long exposure among asset managers and managed funds increased by 12.6k contracts from the prior week.
- GBP/USD: A 17k rise in gross longs among large speculators helped reduce net-short exposure by 21k contracts week-on-week.
- USD/JPY: Gross short exposure to Japanese yen futures increased by 22.6k contracts across both trader groups.
- AUD/USD: Asset managers increased their net-long exposure to a record high, while large speculators lifted theirs to a 13-year high.
- NZD/USD: Net-short exposure fell by 13.8k contracts across both trader groups.
Asset Manager Positioning | COT Report
Source: CFTC (COT), LSEG
FX Futures Positioning | COT Report (IMM Data)
US Dollar Index (DXY) Futures Positioning | COT Report
Effective net-long exposure to the US dollar via currency futures has fallen 77% from its $16.7 billion peak eight weeks ago to $3.6 billion last week. While this has largely coincided with the decline in the US dollar index, momentum clearly turned against bears last week.
The US dollar index rallied 1.5% last week, marking its strongest weekly gain since July 2025. Asset managers and large speculators were therefore correct to remain net long, although the steady rise in short positions over prior weeks likely felt the heat.
With global inflation concerns rising alongside crude oil prices, the US dollar appears likely to remain supported over the foreseeable future. That could see bulls make another attempt to push the USD index back above 100.
Source: CFTC (COT), ICE, LSEG
USD/JPY Futures Positioning | COT Report
Traders remained net-short Japanese yen futures, although there is a growing case for increased long exposure if Japanese yields continue to rise.
Today’s headlines revealed the government may issue fresh debt — a move that could pressure JGB prices lower amid increased supply and push yields higher. That could narrow the yield differential with the US and weigh on USD/JPY, particularly as the threat of MOF intervention remains while the pair trades back above 159.
Of course, persistently rising yields also increase the risk of the BOJ stepping in to calm bond markets or slow its tapering plans further out. But until then, rising yields and fading carry appetite could encourage traders to build gross-long yen exposure and further reduce net-short positioning. And if yields are left unchecked following the government’s latest initiative, speculative positioning may eventually flip back to net-long exposure.
Source: CFTC (COT), CME, LSEG
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-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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