Yen Surges on Tightening Bets and Norway's Shift to Japanese Assets

The Japanese yen has reached its strongest level in seven months after recent gains driven by bets on a faster pace of Bank of Japan tightening and potential capital repatriation.

The dollar dropped as much as 1.4% to 154.05 yen, the strongest the yen has been since February, with the Japanese currency firming from around 160 yen per dollar early last week.

Traders say stop-loss orders were triggered around the August level of 155.2, accelerating the move and suggesting a shift in market sentiment towards the yen.

While some analysts remain cautious about the yen's long-term prospects, others see a potential game-changer in Norway's $2.3-trillion sovereign wealth fund planning to cut its exposure to US Treasuries and add exposure to Japanese government bonds (JGBs).