USD/JPY Rebound as Fed Hike Bets Hit 90%

The USD/JPY pair is recovering after hitting a seven-month low around 153.00 last week, as investors bet on a near-certain Federal Reserve rate hike on Wednesday.

Markets are heavily positioned for the Fed hike, with odds up near 90% following hot August inflation data that has pushed US Treasury yields higher.

A wider US-Japan yield gap is pulling flows back toward the US Dollar, and higher oil prices are also lifting US inflation expectations and yields while worsening Japan's trade balance.

The Bank of Japan meets on Friday, with a 25-basis-point hike fully priced in, which has put a floor under the Yen but capped its potential rise against the US Dollar.