Yen Surges as Markets Raise Bets on Bank of Japan Rate Hikes
The yen surged on Thursday, extending its gains from the previous session and reaching its strongest level in a month. The dollar dropped 1.5% to 156.17 yen, after a 0.9% fall the day before. Traders attributed the move to rising bets on Bank of Japan rate hikes, rather than intervention by Japanese authorities.
Bank of Japan board member Hajime Takata's hawkish comments on Wednesday sparked the rally. He suggested that the central bank should conduct interest rate hikes more quickly to counter inflationary pressures, rather than adhering to a fixed semiannual pace. Markets are now pricing in a Bank of Japan rate hike this month.
Chris Turner, global head of markets at ING, said a Federal Reserve rate hike in September would likely limit the dollar's fall against the yen. The focus is now on Friday's US nonfarm payrolls report, where analysts forecast an increase of 56,000 jobs following July's shock drop of 23,000.