Japanese Yen Surges to Two-Month High on BoJ Hike Bets

The Japanese Yen has reached its highest level since February 18 after Japan released upbeat wage data and GDP figures. The data shows that real wages in Japan climbed 2.4% in July from a year earlier, marking the biggest increase since May 2021. This is the seventh consecutive month of rise in real wages, and it's a significant boost to the Japanese economy.

The Bank of Japan (BoJ) is now more likely to raise interest rates next week and continue tightening thereafter. Traders have fully priced in a 25 basis point (bps) rate hike at the September 17-18 BoJ meeting, with some analysts even seeing a risk of a jumbo hike to anchor rising inflation expectations.

The US Dollar is also under pressure due to hawkish Federal Reserve expectations and geopolitical tensions. However, USD bulls are waiting for the release of the latest US inflation figures before making any big moves.