Yen Surge Sparks Asian Currencies Gains Amid BOJ Hike Bets

The Japanese yen surged towards 158 per dollar on Thursday, causing Asian currencies to strengthen against the US dollar. The yen's pair fell 0.6% to 157.81, after rising as much as 0.5% to 157.99 and climbing 1.2% during New York trading on Wednesday.

The yen's gains came as markets raised bets on a larger rate increase for the Bank of Japan's policy meeting later this month. BOJ board member Hajime Takata said that a 25-basis-point hike was not necessarily set in stone and that back-to-back increases remained possible.

Markets have begun assigning a small probability to a 50-basis-point increase, compared with about 90% pricing for a 25-basis-point hike at the start of the week. Japanese Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent have said they are prepared to intervene again without hesitation if necessary.

The timing of the BOJ meeting is also important, as investors watch the three-day break following the September 18 decision, when thinner trading could make any intervention more effective.