Bearishness toward U.S. Treasuries surged to a record last week. That has given traders confidence to take on a new target: the yen.

Strategists from London to Tokyo are saying the haven currency’s decline may have just begun, with rising Treasury yields and improving global growth giving traders encouragement to push the yen down to 110 per dollar. Hedge funds have ramped up bearish bets on the currency to the highest level in a year.

“There’s still more scope for U.S. yields to climb so dollar-yen could reach 110 as early as the end of March,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities Co. in Tokyo. “Asset managers are lagging hedge funds in their yen positions, and there’s room for their long yen positions to be unwound.”

The yen weakened for a fourth day against the dollar on Monday, slipping back toward a nine-month low set last week. The currency has declined against all of its Group-of-10 counterparts this year except for its haven twin, the Swiss franc. The yen last traded weaker than 110 in March 2020 when pandemic-induced market chaos spurred demand for the greenback as a haven.

Leveraged funds increased net-short positions on Japan’s currency to 12,129 in the week through March 2, from 789 a week earlier, according to data from the Commodity Futures Trading Commission. Funds were net long as recently Feb. 16.

The yen’s losses may accelerate this week after U.S. 10-year yields climbed to 1.62 per cent Friday, the highest level since February 2020.

“The yen is, along with the Swiss franc, taking the brunt of the dollar’s yield-fueled recovery,” Kit Juckes, chief currency strategist at Societe Generale in London, wrote in a note. If 10-year U.S. yields climbed to 2 per cent “without triggering more broad-based risk aversion, I’d expect dollar-yen to get to 110,” he said.

Not everyone agrees.

The velocity of the yen’s decline is “getting to be too much, too fast and will inevitably hit a brick wall at some point down the road,” said John Hardy, head of currency strategy at Saxo Bank A/S. “A reversal in all yen crosses would prove most climactic if asset markets tank badly and finally trigger a bid into bonds.”