Yen Surges to Year-High Amid Rate Hike Bets and Carry Trade Unwinding
The Japanese yen has strengthened to its strongest level of the year, reaching the 153-per-dollar range, as investors bet on additional Bank of Japan rate hikes and the unwinding of yen carry trades.
The dollar-yen exchange rate fell below the 155-yen support level, triggering stop-loss orders and dollar selling by options dealers, which helped the yen post the biggest gain among G10 currencies.
Markets are now watching the 152-yen range as the next support area for dollar-yen, with Rodrigo Catril, a strategist at National Australia Bank, predicting that the pair could test 152.27 yen and 152.10 yen if the trend continues.
The overnight index swap market is pricing in a 97% chance of a 25-basis-point benchmark rate hike by the BOJ next week, which may further boost the yen's strength if the central bank signals the possibility of another increase later this year.