Yen Surges to Near Seven-Month High on Hawkish BOJ Bets
The Japanese yen surged to a near seven-month high on September 8, as market expectations of a Bank of Japan rate hike next week intensified. The currency strengthened to as much as 152.89 per dollar, surpassing levels reached during Japan's July intervention and hitting its strongest since February.
Traders and analysts attributed the yen's rise to bets on faster Bank of Japan tightening, potential repatriation of Japanese funds, and unwinding of carry trades. The currency has now firmed roughly 4% from around 160 yen per dollar early last week.
Nomura's head of G10 FX strategy, Dominic Bunning, noted that the market is pricing in a 25-basis-point rate hike to 1.25% at the September 17-18 meeting. However, he cautioned that it will be challenging for the BOJ to hike faster than expected or to a higher terminal rate.
The dollar index was subdued at 98.93, largely due to the euro trading flat at $1.1615. Market focus now shifts to US inflation readings this week, with traders pricing in a roughly 60% chance of a Federal Reserve rate hike following Friday's stronger-than-expected nonfarm payrolls report.