Yen Surges on BOJ Rate Hike Bets as Dollar Retreats

The Japanese yen surged to its highest level in over six months on Monday, driven by growing conviction that the Bank of Japan will raise interest rates. The currency jumped 1.1% against the US dollar, reaching its strongest level since February 23rd.

Market participants are pricing in a high probability of a quarter-point rate increase by the BOJ at its September 18th monetary policy meeting. This has added momentum to the broader retreat in the US dollar, with the greenback dropping 0.3% against a basket of six major rivals.

The yen's surge is also linked to official data showing that foreign securities holdings fell by a record $87.8 billion at the end of August. Japan's Ministry of Finance confirmed that this decline was directly related to funding recent currency support, with Tokyo spending a record 15.4 trillion yen ($98.6 billion) on supporting the currency.

The dollar's retreat has provided a tailwind for select Asian peers, including the South Korean won, which traded near its strongest level since October 2024. Heavy foreign capital inflows into domestic tech listings have buoyed the currency, with global investors purchasing over $598 million in semiconductor heavyweights like Samsung and SK Hynix.