In the currency market, one constant theme has prevailed for past several months which is, short the Japanese yen against the U.S. dollar. Despite the constant bashing by hedge funds of Ben Bernanke’s policies, which some believe will devalue the dollar, hedge funds love the dollar.  In fact, the dollar is expected to appreciate against almost every other currency, even the mighty Swiss Franc, according to SocGen’s Hedge Fund Watch notes.

The reasoning is pretty straight forward, both the Bank of Japan and the Bank of England are inclined to depreciate their currencies to hinder deflation.

Hedge Funds Positioning By Asset Classes

Hedge funds made big bets on the decline of GBP and JPY and made tidy profits in late 2012 and the new year. Long euro positioning was also a profit maker until January before the election drama in Italy took center stage.

These aggressive easing plans have returned some big numbers for currency focused funds. Last year saw 0ne-third of hedge fund inflows going into macro funds, according to Hegde Fund Research.

Data from EurekaHedge also shows the same; Macro strategies have recruited the largest net inflows since 2011 and has also grown in size in the new year (as of Feb 15).

Inflows In Macro Strategy

Caxton’s global macro funds gained 3.9 percent as March 5, according to a report from Reuters. Winton Capital gained 4.2 percent in the same period while Paul Tudor Jones’ Tudor Capital was up 5 percent in the first two months of the year.

While gains from shorting yen and sterling are expected to continue, the aggressive shortselling might faze out a little. There is also speculation that a worsening debt crisis in the eurozone can backstop GBP and end its fall. There are also fears that devaluation of yen has potential to cause trouble in other emerging economies of Asia who are largely dependent on China.

As for U.S. treasuries, hedge funds have remained net buyers of 10 yr notes after QE3 went in motion. However, interest in 30 yr bonds has flipped more than once in the last year, hedge funds remain net sellers of 30 yr bonds as of now.

BAML’s monitor has also noted the same trend where large speculators are net short on 30 yr notes since the end of last year. However, SocGen notes that there is no aggressive buying or selling in 10 yr and 30 yr notes, the movement has been lukewarm.

Hedge Funds Treasury Positions