Yen Soars to Seven-Month High Amid Rate Hike Bets and Repatriation

The Japanese yen has reached a seven-month high against the US dollar, surpassing levels from Japan's July intervention. The currency strengthened to as much as 153.53 per dollar in morning trading on Tuesday. This marks a nearly 4% gain from around 160 yen per dollar early last week.

Traders and analysts point to several factors driving this sea-change for the embattled currency, including bets on faster Bank of Japan tightening and potential repatriation of Japanese investors' funds. According to Tony Sycamore, market analyst at IG, 'the drop looked more like a sharp unwind of yen shorts after the pair broke below critical supports' around 155 levels seen in August.

The dollar index was weaker at 98.83 amid yen strength, leaving the euro and sterling slightly stronger. Market focus now shifts to US inflation readings this week, with traders pricing a roughly 60% chance of a Federal Reserve rate hike this month following Friday's stronger-than-expected nonfarm payrolls report.