Yen Set to Post Strongest Weekly Gain in Over a Month

The Japanese yen is poised to post its strongest weekly gain in over a month, climbing as high as 155.25 per dollar on Friday and approaching levels reached last month following intervention efforts. The currency's recent surge appears to be driven by growing expectations that the Bank of Japan could adopt a more hawkish stance at its September 17-18 policy meeting.

According to Masahiko Loo, senior fixed-income strategist at State Street Investment Management in Tokyo, markets are increasingly accepting the possibility that Japan could continue normalizing its monetary policy through 2027. This reassessment has contributed to the yen's strength, rather than simply a rush by investors to unwind short yen positions.

Meanwhile, U.S. nonfarm payroll figures and consumer price inflation data will be closely watched for clues about the Federal Reserve's next policy decision. With market pricing putting the probability of a change in interest rates at around 50%, investors are bracing for uncertainty over the path of U.S. borrowing costs.

In other currency markets, the New Zealand dollar gained 0.2% to $0.5892 after the Reserve Bank of New Zealand raised its cash rate by 25 basis points to 2.75%. The Australian dollar also edged higher, gaining 0.1% to $0.7206.