Yen Hits New Seven-Month High as Traders Bet on BoJ Rate Hike

The Japanese yen surged to new seven-month highs against the U.S. dollar on Tuesday, reaching as high as 153.53 per dollar in morning trading. This surpassed levels reached during Japan's July intervention and marked its strongest level since February.

The yen has now firmed nearly 4% from around 160 yen per dollar early last week, with a 1.2% jump during a thin session on Monday amid a U.S. holiday.

Traders and analysts point to several factors driving the yen's rally, including bets on a faster pace of Bank of Japan tightening, potential Japanese investor repatriation of funds, and unwinding of carry trades.

The dollar index was slightly weaker at 98.83 amid yen strength, leaving the euro and sterling both 0.06% stronger.

Market focus now shifts to U.S. inflation readings this week, with traders pricing a roughly 60% chance of a Federal Reserve rate hike following Friday's stronger-than-expected nonfarm payrolls report.