Yen Surges Past Seven-Month High Ahead of US CPI Data

The Japanese yen has reached its strongest level in nearly seven months, surpassing levels seen during Japan's July intervention and hitting its highest point since February. The currency strengthened to as much as 152.89 per dollar on Tuesday, before pulling back to trade at around 154 in London morning trade.

This significant move is driven by growing expectations of a Bank of Japan rate hike next week, with traders pricing in a roughly 25 basis point increase to 1.25%. Japanese Finance Minister Satsuki Katayama reassured markets that Tokyo and Washington remain aligned in their approach to currency markets and will continue close communication.

The dollar index was subdued at 98.93 due to the euro trading largely flat at $1.1615, while market focus now shifts to U.S. inflation readings this week, which could influence the Federal Reserve's interest rate decision on September 15-16. Traders are pricing a roughly 60% chance of a rate hike following Friday's stronger-than-expected nonfarm payrolls report.