BOJ Rate Hike Expectations Send Yen Soaring Past February High
The Japanese yen has surged to its strongest level since February, driven by rising expectations for tighter Bank of Japan policy. The currency strengthened as much as 1.4% to 154.06 per dollar, extending a rapid recovery that has taken the yen beyond the peak reached after coordinated intervention between Japan and the US.
The rally is attributed to both thin holiday trading and increased BOJ rate-hike expectations. According to Bloomberg, the move through 155 accelerated demand for the Japanese currency, which had previously provided support for the dollar.
Speculation that the Japan Government Pension Investment Fund could adjust its asset allocation has added another potential source of demand. Portfolio rebalancing at the start of September also appears to have contributed to the move.
The combined intervention of about ¥27.1 trillion, or roughly $175 billion, is the largest annual amount on record, exceeding the ¥20.4 trillion deployed in 2003. The coordinated operation with Washington was the first by the two countries to support the yen since 1998.