Bearish yen positions have seen a significant reduction after Japanese authorities intervened to support the currency, underscoring how official action is unwinding a crowded trade.

Leveraged funds trimmed net short yen positions in the week through May 5, according to Commodity Futures Trading Commission data. They now hold net short positions of 61,340 contracts, worth about $4.9 billion — the smallest in a month. Asset managers also cut short positions by 13,839 contracts to 10,653.

"Intervention risk and strong official warnings made it unattractive to chase weakness near 160,” said Stefan Rittner, senior portfolio manager at Allianz Global Investors, who is neutral on dollar-yen.…