Selling the Japanese yen has been one of the hottest trades of the year, but the currency's rebound against the U.S. dollar in the past three weeks has some questioning whether the short-yen trade has now run its course.
The yen was trading at about 98.65 to the dollar on Tuesday, off a two-month peak hit on Friday at around 95, but still more than 4.5 percent above a four-and-a-half year low hit last month.
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"The short yen trade started to look very slippery in late May into early June when the yen started to rise rapidly," said Kathy Lien, managing director at BK Asset Management in a note. "This aggressive reversal, which happened within 2.5 weeks led many traders to wonder if the best trade of 2013 is now over."
Even with the yen's recovery, the currency is down 14 percent from where it started the year and analysts say some investors are using the yen's bounce as an opportunity to put on fresh short-positions, in other words a bet that the yen will head lower.