Yen Climbs to Seven-Month High as Traders Bet on Bank of Japan Hike
The Japanese yen has extended its rally to reach a seven-month high against the US dollar, driven by growing bets of a Bank of Japan interest-rate hike and potential repatriation of funds from investors. The yen strengthened to as much as 153.53 per dollar in morning trading on Tuesday, surpassing levels reached during Japan's July intervention and hitting its strongest since February. This adds to the yen's 1.2 percent jump during a thin session on Monday, with the Japanese currency now having firmed nearly 4 percent from around 160 yen per dollar early last week.
Traders and analysts attribute this sea-change for the embattled currency to several factors, including bets on faster Bank of Japan tightening and potential repatriation of funds. Tony Sycamore, market analyst at IG, notes that the drop in the yen looked like a sharp unwind of yen shorts after the pair broke below critical supports from around 155 levels seen in August and May.
The dollar index, which measures the greenback against a basket of currencies, was a touch weaker at 98.83 amid yen strength. The euro and sterling were both 0.06 percent stronger, last at $1.1628 and $1.3549, respectively. Market focus now shifts to US inflation readings this week, with traders pricing a roughly 60 percent chance of a Federal Reserve rate hike this month following Friday's stronger-than-expected nonfarm payrolls report.