Yen's Strong Rally May Signal BOJ Rate Hike

The Japanese yen has been on a strong rally this week, putting it on track for its best week in over a month. The yen strengthened to as much as 155.25 per dollar in Asia trade before retreating to 156.28, down 0.3%. Analysts say the sudden jump in the yen reflects growing expectations that the Bank of Japan could be more hawkish than previously expected when it meets on September 17-18.

Atsushi Mimura, Japan's top currency diplomat, said he remained alert to exchange-rate moves and was in constant contact with U.S. authorities, keeping markets aware of the possibility of another round of official yen buying.

Ray Attrill, head of FX strategy at National Australia Bank, noted that unless there are significant policy surprises or more aggressive intervention by the U.S. Fed on behalf of the yen, a sustained move below 155 is unlikely in the coming weeks.