Yen Surges Against Dollar Amid Hawkish BoJ Expectations

The Japanese yen has reached its strongest level since February against the US dollar after falling to a six-month low. The USD/JPY pair dropped towards 153 on Tuesday, marking a 4% decline in just days from last week's 160 level.

This surge in the yen can be attributed to more hawkish expectations surrounding the Bank of Japan's monetary policy. Traders are unwinding short yen positions as they anticipate a rate hike next week and another increase by January, taking the rate to 1.5%.

The data released overnight showed Japan's Q2 GDP revised higher to an annualized 1.4%, driven by stronger business investment. Real wages also rose 2.4% year-on-year in July, marking their biggest gain since May 2021 and the seventh consecutive monthly increase.