Hedge funds significantly reduced their bearish exposure to the yen following coordinated efforts by US and Japanese officials to stabilise the currency, reversing a large build-up in short positions earlier this summer, according to a report by Bloomberg. The report cites data from the Commodity Futures Trading Commission (CFTC) as showing that leveraged investors cut their net short yen position in futures and options markets by around half, to about 63,600 contracts as of 4 August. That represents a substantial retreat from late June, when hedge funds and other leveraged traders held almost 138,000 net short contracts — their largest bearish position against the yen since 2007. Markets are now pricing roughly a 40% probability of a US rate increase next month, compared with about 60% before the payrolls figures were released. For hedge funds that had accumulated one of the largest yen short positions in years, the combination of official intervention risk and shifting interest-rate expectations has made maintaining those trades considerably less attractive.