Yen Soars as Traders Bet Big on BOJ Rate Hike

The Japanese yen has been on a two-day rally against the U.S. dollar but retreated slightly to 156.45, down 0.4%. Despite this, the yen is still heading for its strongest week in more than a month with a predicted 2.2% rise.

Analysts attribute the yen's surge to increased bets that the Bank of Japan will be more hawkish at its September 17-18 meeting. This has led traders to raise expectations for an interest rate hike, but some experts warn that the market may be overestimating these chances.

JPMorgan warned that a potential unwinding of yen shorts could send the dollar to a 142-146 range against the Japanese currency.