Yen Soars Amid Hawkish Rate Hike Bets, Traders Trim Fed Expectations

The Japanese yen is headed for its strongest week in over a month as investors bet on a Bank of Japan interest rate hike. The currency surged to 155.25 per dollar, just off its July high, but retreated to 156.45.

Analysts say the yen's sudden jump largely reflects bets that the BOJ will be more hawkish than expected when it meets on September 17-18. Japan's top currency diplomat Atsushi Mimura remains alert to exchange-rate moves and is in constant contact with US authorities, keeping markets on high alert for another intervention.

JPMorgan warned that an estimated 16 trillion-17 trillion yen in yen shorts could send the dollar to a 142-146 range against the Japanese currency. However, traders pared bets on a September rate hike after Federal Reserve Governor Christopher Waller's dovish comments, with implied probabilities of a move this month back to 50%.