Yen Soars Amid Hike Expectations as Peso Strengthens Across Latin America

The Japanese yen has staged an impressive turnaround, rising by around 2% against the dollar over the past week. This is its strongest weekly performance since July.

This unexpected move is being driven by increased bets on another Bank of Japan rate hike. Traders are rapidly increasing their expectations for a 25-basis-point hike at the September 17-18 meeting, pushing Japanese two-year bond yields to their highest levels since 1995.

The yen's strengthening is not just visible against the dollar but also against Asian currencies like the Philippine peso, which has climbed by around 3% over the past week.

In contrast, Colombia's peso and Mexico's peso are also gaining strength. The Colombian currency has risen by around 2.7% against the dollar, driven by a combination of high interest rates, stronger oil prices, and improving energy sector expectations. The Mexican peso, meanwhile, has fallen below its target of 17 per dollar, despite weak economic growth and uncertainty surrounding U.S. trade policy.