Yen Rockets to Seven-Month High as Traders Bet on BOJ Rate Hike

The Japanese yen surged to a fresh seven-month high against the US dollar on Tuesday, surpassing levels reached during Japan's July intervention. The yen strengthened to as much as 153.53 per dollar in morning trading, its strongest since February. This added to the yen's 1.2% jump during Monday's thin session amid a US holiday, with the Japanese currency now having firmed nearly 4% from around 160 yen per dollar early last week.

Traders and analysts said a slew of factors, including bets on a faster pace of Bank of Japan tightening, and the potential for Japanese investors to repatriate their funds, are driving the yen's rally. This is leading to an unwind of carry trades and US political pressure is also contributing to the currency's turnaround.

'The drop looked more like a sharp unwind of yen shorts after the pair broke below critical supports' from around 155 levels seen in August and May, said Tony Sycamore, market analyst at IG.