Yen Surges to Seven-Month Highs Amid Hike Bets

The Japanese yen has surged to fresh seven-month highs against the US dollar on Tuesday, surpassing levels reached during Japan's July intervention. The currency strengthened to as much as 153.53 per dollar in morning trading, marking its strongest level since February.

This marks a significant shift for the embattled currency, with the yen now having firmed nearly 4% from around 160 yen per dollar early last week. According to Tony Sycamore, market analyst at IG, the drop looks more like a sharp unwind of yen shorts after the pair broke below critical supports.

The dollar index, which measures the greenback against a basket of currencies, was slightly weaker at 98.83 amid yen strength. Market focus now shifts to US inflation readings this week, with traders pricing a roughly 60% chance of a Federal Reserve rate hike this month following Friday's stronger-than-expected nonfarm payrolls report.