(Bloomberg) -- The gulf between interest rates in the US and Japan means traders are still betting against the yen — even after authorities likely intervened in recent weeks to prop up the beleaguered currency.

Hedge funds held more than 77,000 contracts tied to wagers that the yen will fall in the week ending Tuesday, about twice as many as they did a year ago, according to data released Friday from the Commodity Futures Trading Commission. Asset managers boosted bearish bets by about 6,500 contracts to nearly 60,000, marking the biggest increase since March, the data show.

While volatility has eased in recent days, ameliorating some of the impetus for further forays by officials into currency markets, the gulf between Japan’s ultra-low interest rate and US rates stuck at a two-decade high is keeping the pressure on the yen. The currency is the worst-performing among Group-of-10 peers, falling about 12% over the past year. It is also the most shorted among major currencies tracked by the CFTC, Bloomberg-compiled data show. 

It “seems likely the Fed cuts once or twice this year and maybe BOJ hikes again, but that will still leave a large rate gap,” Brad Bechtel, global head of FX at Jefferies Financial Group Inc., said. For a major change in positions the BOJ needs to become more hawkish or the Fed become much more dovish and “both seem unlikely,” he said. 

Leveraged funds increased their bearish yen positions to a record high in late April as the currency weakened. While likely intervention by Japanese authorities to prop up the yen caused some traders to trim their bearish bets in recent weeks, the number number of contracts wagering against the yen remains elevated.

What the data doesn’t capture is the brief respite the Japanese currency got on Wednesday after a US inflation report pointed to easing price pressures. 

The CPI readout reignited bets that the Fed may cut interest rates more than once this year from current upper bound of 5.5%, weighing on the dollar and bolstering the yen. While the swaps market prices about 40 basis points of Fed cuts this year, traders are betting the BOJ will raise rates by about 25 basis points from the current range of 0% to 0.1%. 

The Bank of Japan ended its negative rates policy in March but has kept the market guessing about the amount of further hikes, with stagflation risks limiting its maneuvers. 

The yen was little changed this week, trading near 155.70 per US dollar on Friday afternoon in New York.

“The yen shorts are still very extreme, and they will remain highly elevated,” said Deutsche Bank AG strategist Alan Ruskin before the release.

--With assistance from Carter Johnson.

(Updates with CFTC data, markets throughout.)

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