Yen Surges as Traders Bet Big on BOJ Hike

The Japanese yen surged by 2 percent against the US dollar on Thursday, as traders increased bets on a Bank of Japan interest rate hike. The BOJ's data showed no evidence of official intervention behind the currency's strong gains on Wednesday.

BOJ board member Hajime Takata's hawkish comments were cited as a factor behind yen strength. He said that the central bank should conduct interest rate hikes nimbly to counter intensifying inflationary pressures, rather than adhere to a fixed semiannual pace anticipated by markets.

Markets are now pricing in 75 percent odds of a 25-basis-point BOJ hike this month, with some traders speculating that an even larger increase is possible. The Japanese yen strengthened 1.99 percent to 155.6 per dollar, approaching the 155.21 level that was the yen high after the July intervention.

Meanwhile, the dollar added to losses as traders pared bets on a September rate hike after comments from Federal Reserve Governor Christopher Waller. He said that if upcoming data confirms that inflation pressures are cooling off, he is inclined to argue in favor of keeping interest rates steady at the US central bank's next policy meeting.