Yen Surges to Seven-Month High Amid Bank of Japan Tightening Bets

The yen has surged to a seven-month high against the dollar, reaching 154.42 on Monday (Sept 7), according to data from MUFG's Lee Hardman. This marks the lowest level since February and pushes past the lows struck in August after Washington and Tokyo jointly intervened in markets to prop up the yen.

Analysts point to several factors driving the yen's strength, including bets on faster Bank of Japan tightening and expectations that Japanese investors may shift funds home. The unwinding of carry trades and US political pressure are also contributing to the currency's rise.

Lee Hardman notes that breaking past the 155 level is a bullish signal for the yen, which could see further upside. Recent moves have been dramatic, with the dollar trading above 160 yen as recently as last Tuesday. The market had seen it as a one-way trade, but traders are starting to reassess their outlook.

The euro also dropped one per cent on the yen to 179.5, while the pound gained a similar amount against the US dollar. Traders are pricing a roughly 57 per cent chance of a Federal Reserve rate hike this month in the wake of Friday's nonfarm payrolls report, with much now depending on this week's inflation data.