Speculators in yen futures reduced their net long position in the week ended July 6, Commodity Futures Trading Commission data showed on Friday.
The CFTC's Commitments of Traders report on speculative positioning data are used by analysts as an indicator of future market direction.
For example, extreme net long speculative positions often signal a decline in the currency, especially if that position conflicts with the positioning of the more influential commercial players.
Speculators generally are trend followers seeking to pick a precise top or bottom in the market.
According to the data, speculators cut the net long yen position to 2,417 contracts from 8,416 a week earlier. This was the smallest net long position since June 8, which saw net long contracts of 598.
"This suggests that specs have lost a little bit of patience on the long yen trade, and started to look elsewhere for a clear trend," said Sean Callow, currency strategist at IDEAglobal in New York.
"In part, they've been caught a little bit off guard by the fact that the Japanese stock market took a turn for the worse during that week - that, plus speculation about the Japanese elections. It's just been a negative yen environment," he added.
Markets expect the ruling Japanese Liberal Democratic Party to survive Sunday's upper house election. Analysts, however, remain a little leery of Japanese Prime Minister Junichiro Koizumi's ability to implement reforms, especially if his party obtains less than a majority of votes.
Speculators, on the other hand, increased the net long position in the euro to 19,037 contracts, compared with 13,755 the previous week. Analysts said this reflected market perceptions of renewed dollar weakness during that period, given widespread expectations that the Federal Reserve will not be aggressive in raising US interest rates.
Mirroring expectations of further interest rate hikes by the Bank of England, the sterling net long position increased sharply to 21,077 contracts, the highest since mid-December last year.