BOJ Rate Hike Looms as Yen Hits 7-Month High Amid Middle East Tensions

The Japanese yen has been trading near a seven-month high, hovering around 154 per dollar. This strength is attributed to expectations of more aggressive policy tightening by the Bank of Japan (BOJ), as well as the unwinding of carry trades and signs of increased asset repatriation by domestic investors.

Markets are eagerly awaiting the BOJ's decision on Friday, which is expected to raise its policy rate to 1.25%, a level not seen since April 1995. This move aims to address persistent upside risks to prices.

US Treasury Secretary Scott Bessent has urged the BOJ to pursue more aggressive policy tightening to prevent excessive yen weakness. Investors are also keeping an eye on developments in the Middle East, where oil prices surged again following Saudi Arabia's shutdown of the critical East-West pipeline.