Prior to U.S. Treasury Secretary Bessent publicly challenging traders to test his resolve in bolstering the yen, hedge funds had already significantly reduced their bearish bets on the Japanese currency. Data from the Commodity Futures Trading Commission, released on Friday, reveals that leveraged traders cut their short positions on the yen by half during the week ending September 8th.

This shift occurred just before Bessent’s recent remarks, where he dared traders at an event to bet against him. Claiming access to privileged information regarding the Bank of Japan and yen policy, he provocatively declared himself to be the "house." The yen has since strengthened by 1.7% this week, extending its recent rally. At 4:15 p.m. New York time on Friday, the dollar/yen pair was trading around 153.68.

Meanwhile, separate data showed that speculative FX traders, including asset managers and non-commercial players, pared back their bullish dollar wagers for a sixth consecutive week through September 8th, reducing the total positions to $19.4 billion.