Speculators in IMM yen futures increased a net long position to its largest on record in the week ended February 3, data from the Commodity Futures Trading Commission showed on Friday.
The data from the CFTC's Commitments of Traders report on speculative positioning are used by analysts as an indicator of future market direction. For example, extreme net long speculative positions often signal a decline in the currency, especially if that position conflicts with the positioning of the more influential commercial players.
Speculators in yen futures extended the net long yen position to 64,499 contracts from 57,992 contracts a week earlier.
"It's consistent with the price action we saw," said Lauren Germain, currency analyst at Banc of America in New York.
She said speculators appear to be testing the resolve of Japanese authorities to use intervention to weaken their currency. But if the Group of Seven finance ministers this weekend were to warn Japan against further interventions, then speculators might have to trim that net long position, Germain said.
"We'll probably see a little bit of a see-saw," she said. "But I think the market really wants to see how far the Japanese monetary authorities will let the yen go."
March yen futures rose during the CFTC's reporting period to a close of $0.009486 on February 3 from a close of $0.009463 on January 28. March yen scored a contract high on February 3.
Speculators in Canadian dollar futures, meanwhile, reversed a net long position, scoring the first net short position since April 2002. March Canadian dollar futures have fallen sharply since mid-January, when they notched a contract high.
The net short position was 3,852 contracts, compared with a net long position of 13,709 contracts reported a week earlier. The speculative community has been erasing the net long rapidly since it reached its largest in nine months during the January 13 period.
March Canadian dollar fell to a close of $0.7470 on February 3 from a close of $0.7537.