Yen Soars to Seven-Month High on Rate Hike Bets

The Japanese yen continues to rally, reaching new seven-month highs against the US dollar on Tuesday. Traders are unwinding short positions due to growing bets of a Bank of Japan interest-rate hike.

The yen strengthened to as much as 153.53 per dollar in morning trading, surpassing levels reached during Japan's July intervention and hitting its strongest since February.

This added to the yen's 1.2% jump during a thin session on Monday amid a US holiday, with the Japanese currency now having firmed nearly 4% from around 160 yen per dollar early last week.

Analysts say a slew of factors are driving the yen's strength, including bets on a faster pace of Bank of Japan tightening and potential repatriation of funds by Japanese investors, which is unwinding carry trades and US political pressure.

The dollar index was weaker at 98.83 amid yen strength, with the euro and sterling both stronger as well.