LONDON/SINGAPORE: The yen surged to a seven-month high on Monday as traders reassessed the battered currency’s outlook, driven by expectations of faster Bank of Japan policy tightening and growing bets that Japanese investors could repatriate funds.
The main event this week is Friday’s US inflation report, which could shape the Federal Reserve’s decision on whether to raise interest rates later this month and influence the dollar’s direction.
The European Central Bank also meets on Thursday and is widely expected to raise euro zone interest rates.
Until then, the focus remains on the yen. The dollar fell to as low as 154.05 yen, its weakest level since February, and was last down 1.1 percent at 154.4. It has now broken below lows reached in August after Washington and Tokyo jointly intervened to support the Japanese currency, which was then trading at 40-year lows.
Much of the yen’s post-intervention gain quickly faded, but fresh support from capital repatriation, unwinding carry trades and US political pressure is prompting investors to rethink long-held bearish positions.
Lee Hardman, senior currency analyst at MUFG, said the dollar’s break below 155 yen seemed to have reinforced traders’ bullish views on the Japanese currency.
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