Key facts
- Hedge funds closed out positions betting on a flatter US dollar/yen basis curve.
- The trade was linked to Japan's $550 billion investment pledge to the US.
- A new tranche of the pledge was announced this week.
Hedge funds that had bet on a flatter US dollar/yen cross-currency swap basis curve, on the back of Japan's $550 billion investment pledge to the US, have largely closed out their positions at a loss. While a new tranche was announced this week after several months of silence, it might not prove a trigger to re-enter the trade. The bet relied on Japanese megabanks having to source large volumes of yen.
