Yen Surges to Seven-Month High as Traders Reassess Outlook

The Japanese yen has reached a seven-month high against the US dollar due to expectations of faster Bank of Japan tightening and capital repatriation. The US dollar fell 1.14% against the yen on September 7, its lowest level since February.

Traders are reassessing their outlook on the yen after bets on faster interest rate hikes by the Bank of Japan. This has led to a surge in the Japanese currency, with the euro also dropping 1% against it.

The main event this week is US inflation data on September 11, which will influence the Federal Reserve's decision on an interest-rate hike later in the month and the direction of the US dollar.

Lee Hardman, senior currency analyst at MUFG, said that breaking past the 155 level is a bullish signal for the yen. He added that the market had seen it as a one-way trade, but now they're starting to see signs that the Bank of Japan's rate hikes are having an effect.

Markets are pricing a roughly 57% chance the Federal Reserve will hike rates later in September after the forecast-beating non-farm payrolls report. A hot CPI print would seal a September hike, while a cooler reading would strengthen the case for a hold and leave the US dollar vulnerable to a dovish Fed repricing.